by Taressh Bhatia
The festivals of Lights, Crackers and Sweets, Diwali, is one of the most celebrated festivals of India. Diwali is a major cultural festival of lights, celebrated by millions of Hindus, Sikhs and Jains across the world.
Let us take a close look at the top 7 important significant events that go around Diwali time and then find out ways to improve our Financial Planning from Diwali.
1. It marks new beginnings and the triumph of good over evil. A celebration of the day Lord Rama returned to his kingdom Ayodhya after defeating the demon-king Ravana. Can we also add:
a. Light over darkness and
b. Knowledge over ignorance.
2. The festival is widely associated with Lakshmi, goddess of prosperity, with many other regional traditions connecting the holiday. They perform (Lakshmi puja) – worship ceremonies of Lakshmi, the goddess of prosperity and wealth, and partake in family feasts, where mithai (sweets) and gifts are shared.
3. Diwali marks the Hindu New Year. For much of India’s trading and business community, it symbolizes the new financial year as well. As a result, several critical Diwali traditions are centred around money. Therefore, Diwali is considered a particularly auspicious time to acquire new assets and make new investments, and even to shop and perhaps to gamble!
4. Special prayers are also performed by Hindu business owners and bookkeepers to honour their safes, ledgers and accounting systems ahead of the new financial year. (In most Hindu households it is common for inanimate material objects like account books, houses, offices, cars, and electronics to be ritually worshipped or blessed.)
5. In contrast to the austerity of several other faith traditions, in Hinduism, wealth and spirituality are not seen as antithetical. Wealth gained by honest means is considered divine, and while greed is discouraged, it is perfectly acceptable to pray for financial success and prosperity.
6. Gods and goddesses are depicted with an abundant assortment of gold coins, jewellery, and ornaments, as well as sweets and flowers. Images and statues of Hindu deities are garlanded with banknotes, and cash is an essential component of Hindu prayer offerings. This curious link between India’s material aspirations and spiritual goals becomes most visible during Diwali.
7. In the lead-up to Diwali, Indians prepare by cleaning, renovating, and decorating their homes and workplaces. People wear their finest clothes, illuminate the interior and exterior of their homes with diyas and rangoli.
With these seven learnings, can we bring out a correlation to the investment world as well?
9 Lessons to Learn from Diwali for Financial Planning
To improve our Financial Planning from Diwali let’s now look at focused Nine Lessons to Learn from Diwali for Financial Planning:
1. Noise Pollution:
Like in Diwali nowadays, it is recommended not to create noise by firing crackers. Similarly, you hear “noises” of people giving you investment ideas, rumours, tips and recommendation by friends. Your investment decisions should be based on your goals, time horizon and risk appetite. Your richness principles should be the foundation for your financial planning, and hence you should ignore all these noises. It is better to take help from a Registered investment advisor rather than making an impulsive decision. Also, you have to overcome such disempowering money beliefs which may have sprinkled in your mind due to years of bad noise!
The next most close and interesting correlation of fireworks is to prepare for emergencies, with this meaning keeping water buckets and the numbers of the nearby fire stations handy. It is true that emergencies and contingencies are a part of everyone’s life, and being a wise investor requires not only planning for emergencies, but also for contingencies in the form of death. How would you make provisions for all the”what if” in your lives?
a. To ensure that all financial goals and commitments towards your family are honored, plan to take term insurance policy. This should ensure a stable lifestyle for your loving family on your death.
b. Basic Health insurance, accident insurance and critical health insurance plans would provide for the health and critical illness coverage and stable lifestyle in such contingencies.
c. Creating contingency funds could act as an emergency fire extinguisher. Unpredictable situations like a COVID-19 or a lockdown doesn’t come announced. Keeping 6 months to a 12 months household expenses in a separate emergency fund is advisable.
3. Risk Management
While keeping fireworks out of reach of children during Diwali, you take adequate care to avoid any mishap. Financial planning requires a clear understanding of the risks and returns available on the different investments like shares, mutual funds and fixed deposits in companies and banks. Therefore, you need to get strategies for risk management of your investments while constructing your portfolio. While investing, you need to apply safety and security norms for your investments. Furthermore, safety and appropriate storage of your precious investments in the form of shares, mutual funds, land and flat documents, insurance and other investments lies in storing them into runaway folders.
4. Future planning
Indian families plan their Diwali spending’s – gifts, clothes, vehicles – throughout the year. We keep the gender, age, and the personality of that person in mind while gifting. However, do you fail to carry the same planning and enthusiasm when it comes to finances? Similarly, keep your age, goals, investment tenure, expected returns and risk appetite while you invest in a suitable product. In your 20’s or early 30,you may not utilize the benefits of planning finances early and end up losing more money in the later stages of life. The money lost at a later age may be in the form of higher premiums or low compounding benefits. Diwali makes everyone geared up to celebrate and make the most of the occasion. With regards to the festival, people plan their shopping, vacation and other requirements months in advance. Had you planned your vacation and booked your tickets in advance; you would have paid much lesser than what you would be paying just days before Diwali. Similarly, if you apply the notion of ‘planning in advance’ on your financial and investment planning, you start investing early to generate better returns. You can achieve your goals such as a peaceful retirement, children’s education, buying your own house, etc.
5. Goal-based investing
On Diwali, personal preferences are inherent when you buy gifts for friends and family as per their age and liking. In the same way, your investments should also be based on personalized goals. After that, your investment advisor links all these goals to specific investments also. Your financial planner should make your financial plan always focused on your important goals, like buying a home, retirement, children’s education etc. Every goal in your life naturally impacts your personal cash flow. Goal-based investing, therefore, includes proper review monitoring systems and goes on incorporating all the changes in your financial plan leading to the maximized outcome.
6. Variety is rewarding
Don’t you add variety to your Diwali celebrations with different sweets, firecrackers, clothes, gifts, decorations, lighting etc. In the same way, diversification in your portfolio lets you enjoy different benefits that entail different financial instruments. By doing this, you reduce the amount of risk within a portfolio. A balanced portfolio will hold investments with different risk levels, leading to a reduced risk level of similar investments held together.
7. Dispel the darkness of ignorance
When you are lighting a lamp, you eliminate the darkness surrounding you. Similarly, you dispel our ignorance related to finances, investments etc. Symbolically, a lamp signifies that enlightenment and possessing knowledge is precious. Embark on a journey to reading more about the financial planning process and investments. Make your relationship with money better and better. It is always a positive point that helps you to dispel the haze encompassing your financial wisdom, leading you to be more financially empowered. So, look at your money too in the same way. You need to know the basics of
a. cash flow,
c. Can save how much per month/ year
d. Your Net worth.
e. Your risk appetite
f. Your creditworthiness.
g. Investment options,
h. how to select investment vehicles,
8. Cleaning your home
Just before Diwali, you and your entire family embark on a cleanliness campaign at your home. Besides, you start disposing of goods that you no longer require. In the same manner, why don’t you have a similar approach to your portfolio? Ask your investment advisors to scrutinize your portfolio and identify mutual funds or stocks that are not performing well. Ask him to use his methods of analysis and experience to ensure that the existing stocks are in sync with your goals or objectives. Discuss as to how he would evaluate all your investments. Just like in our homes, goods that are not needed end up in consuming a lot of space and have dust settled over them, our portfolio too could consist of irrelevant old funds stocks that could adversely affect other assets too. Therefore, one needs to review them too with your investment advisor. Hiring an investment advisor to take care of all this activity will give you a professional opinion and save you money.
9. Prevention is better than cure
During Diwali, you may be buying a variety of crackers and burning them left right and centre. All those crackers create different energy altogether. If you do not take adequate precautions, they can have adverse consequences, and some may go out of control also. Also, you take precautions while burning crackers. You also keep in mind the kind of clothing you are wearing, and also those around you are wearing. You ensure that children too are wearing less inflammable clothes. Similarly, when you invest, make sure to take the help of an experienced financial advisor. He should take adequate precautions of your risk appetite, time horizon and goals. Blindly investing in any financial product that seems lucrative can lead to financial disasters.
9 Lessons to Learn from Diwali for Financial Planning
Are these findings interesting? So, 9 Lessons to Learn from Diwali for Financial Planning
Your own richness principles should be the foundation for your financial planning and not rely on all these noises. It is better to take help from a Registered investment advisor rather than making an impulsive decision.
To conclude, have your own principles for your personal finance. This Diwali, promise to focus on your financial plans. Please keep track of them while making all your investments.
Stay Safe. Keep everyone around you safe, happy and believe in your money working for you. Make sure that money makes you happy this Diwali!
We wish this Diwali brings you HEALTH, WEALTH, SUCCESS, PROSPERITY leading to a happy blissful life ahead.
Disclaimer: Mutual Fund Investments are subject to market risks. Please read the Statement of Additional Information (SAI) and Scheme Information Document (SID) carefully before investing; This blog is written with the sole purpose of educating and in no way intended to be taken as financial advice. This blog should not be construed as an investment or any kind of financial advice. NO part of this blog can be used, reproduced, amended or copied without the prior written permission of the author, failure of which may attract appropriate legal action.
This article is written by Taressh Bhatia, who is the partner in SEBI Registered Investment Advisor firm: Advantage Financial Planners LLP.