Financial Lessons from 2022

Life is full of surprises. Whether in personal, professional, or financial matters. However, if we do not learn from our mistakes, we are committing a crime against ourselves. As a result, let me share a few lessons I’ve learned in 2022.

Financial Lessons

Nifty was around 13,700 last year. In 2020, we experienced a fall caused by Corona. As a result, the uptrend from around 8,000 Nifty levels in 2020 to around 13,700 in December 2021 instilled enormous confidence in us that the worst was over and we now only had to face the uptrend. The reality, however, is quite different.

Financial Lessons from 2022

# Nothing is PERMANENT

As previously stated, the Nifty fell roughly 27% from its peak of 12,256 on around 10th January 2020 to 8,083 on around 3rd April 2020. It took approximately 6-7 months to reach the previous level, and it then peaked at 18,338 on October 14, 2021. Massive 45% uptrend from the fall.

This instilled a great deal of confidence in us that going forward Indian or global economies are now in the midst of a multi-year or multi-decade bull run.

NONE, however, predicted the Ukraine war or the global inflation impact. Because of these factors, we are almost a year into a sideways market. Looking back at the Nifty chart from last year, we can see that the uptrend is around 7.3%. For those who saw a fantastic uptrend of nearly 45% from the Covid fall to last year’s end level, it may appear to be ridiculous returns.

The truth, however, is that NOTHING IS PERMANENT. Neither BULL nor BEAR markets.

# FOMO (Fear Of Missing Out) creates more mistakes

Investing in US stocks became popular after Covid. Mostly because of how the US market behaved at the time. In fact, if you don’t invest, you’re treated like a DUMB. Many of our new clients used to ask why we didn’t recommend investing in the US equity market. However, as previously stated, this FOMO phobia fades gradually as the US market crashes more dramatically than the Indian market for a year.

The below images will give you clarity.

BSE Sensex Vs Dow Jones Vs Nasdaq

The same is the story of Crypto.

Bitcoin 1 Yr Returns

In fact, I was opposed to Crypto investing and always asked those who invested or were eager to invest, “If something went wrong with the market or platform providers, who do you approach?” Why take an unnecessary risk when the answer is NONE?

Many people are unaware of the costs associated with investing in stocks in the United States. Hence, I wrote a detailed post on that “How to invest in US Stocks from India?“. Many people blindly followed US stock investing and cryptocurrency. When you have FOMO phobia, you notice that you make a lot of mistakes.

# Emergency will not ask for your permission

I lost a friend and classmate who never approached me for financial advice and did not cover the fundamentals such as term life insurance, health insurance, an emergency fund, or accidental insurance. He died of cardiac arrest, leaving his wife with two small children. He only had a few LIC policies, one loan-free flat, and one or two plots of land.

Just imagine the situation of a family. They have to think of current ongoing expenses and also the kids’ future.

Life is full of unknowns. That is why the following quote is ideal for preparing for such surprises.

“Hoping for the best, prepared for the worst, and unsurprised by anything in between.” —Maya Angelou

We cannot predict economic downturns, fatalities, medical emergencies, or job loss. However, the only thing we can do is prepare. When such emergencies strike, the magnitude is unknown to us.

# All assets have BEST and WORST days

Consider history. You may have noticed that Gold (refer our post “Gold Volatility – Based on 43 Years of History“) is volatile. For a few years, it could be real estate and gold, and then it could be equity. As a result, we are unsure which asset class will perform better in the future. NOBODY can predict. Concentrating on a single asset class in such a situation is extremely risky. Diversification, on the other hand, is a mantra.

In fact diversification is not new to us. When I was reading John Bogle’s book “Common Sense on Mutual Funds”, I first came across “The Talmud Portfolio”. The Talmud is a collection of Jewish texts under the category of the Oral Torah. The Jerusalem Talmud was published around 350–400 CE, while the widely cited Babylonian Talmud was published about 500 CE. The two components that make up the Talmud are the original source or Mishnah, and the Gemara (which is written in Aramaic and includes additional writings that expand on the topics discussed in the Mishnah).

One such online version of Bava Metzia 42 as “Rebbi Yitzchak advises a person to invest his money – one-third in land and one-third in business, and the remaining third, he should hold in cash.”

However, we ignore such basics of investing. Mainly because of the rush to create wealth fastly and looking for BEST and most COMPLICATED product served to use by the hungry financial industry.

# Small Steps with CONSISTENCY matter a lot

Every day, I walk 8-10 kilometers. Assume that if I skip 65 days in a year (due to personal, health, or weather issues), then 300 days 10 km a day means I walked around 3000 km in a year. More than the distance between Bangalore and Delhi!!

Similarly, if you apply the concept of reading 5 pages per day (which takes no more than 30 minutes of your time), you will end up reading 1,825 pages per year. If we assume that each book is around 200 pages long, you will have read 9 books in a year.

I’m using these examples because I do these two things on a daily basis. You can, however, develop your own habits that will benefit you personally, professionally, and financially.

Remember that in today’s world, FOCUS is more important than IQ or EQ. Use this in your personal finance. Begin by making small changes every day and wait a few years or decades to see the results.

First, I used health as an example. Mostly because small changes to your health can make a big difference in the long run. After all, what good is wealth if you don’t have good health?

Please share your learnings too if they are interesting. At the end, I firmly believe in mutual learning 🙂

8 thoughts on “Financial Lessons from 2022”

  1. Good article to end the year 2022!

    I decided to stay away from US stock investing or any International investing during 2021, after in depth due diligence and analysis of valuations of US Tech stocks. At that time, it was looking foolish that I took such a decision. Similarly I decided to stay away from Cypto since I was not able to understand its valuation. Some of my friends invested in it during 2020.

    Now, during 2022, in the hindsight, my both decisions seems useful and it has avoided the loss which I might have incurred. Sometimes, it is difficult to stay away from new investing fads, but if you follow your own process and stick to it, it may prove useful in the long run.

    Achieving financial goals is more important than following any new investment styles or patterns, is the lesson which I have learnt during the past few years.

  2. venkata chari v s

    very useful read. Metoo walk 6-8 KM. onlyone lapse is i do not have healthcover now., though i have assigned sufficient amount for that (since i did not extend the cover ptior to reaching 75 years). regards

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