Year End Note – 2020 – A Gateway to the Next Decade

1 Jan 2020, while welcoming the New Year, no one would have imagined that this year would be coming with such a roller coaster which would not have been seen in centuries. COVID-19 stalled the entire globe, locking most of the population inside their homes for several months. Many lives were lost, countless lost their livelihoods, businesses went bust as they couldn’t sustain months of shutdown. Reacting to it, the global stock markets tanked in March but surprisingly came back up at its life time high levels as the year end approached – thank you to the constant flooding of ‘helicopter money’ by the big daddy of the west. H1 2020 saw a huge bond market turmoil forcing one of the biggest mutual fund houses to even close many of its schemes – something never envisaged in the past. And as I write this note, looks like a potential cure has been identified with a daunting task ahead – one of the largest inoculations in human history to be conducted in the coming year(s).

In challenging times, along with threats, there were a lot of learning opportunities to help safeguard against such future uncertain events. Some of my partial convictions & academic concepts became fully cemented / tested as they went through the extreme stress introduced by COVID. At the same time, the good practices assisted in sailing through the storm. This blog post is more to talk about these learning which hopefully can help all of us going forward.

Asset Allocation

This was the top learning of 2020 for me. One must identify what percentage assets they need to invest in, keeping in mind one’s goals and investment timelines. These assets must be carefully identified to diversify and follow the time tested saying ‘do not keep all your eggs in one basket’. Different investment options behave differently over periods of time and a careful mix will try to ensure that some or the other investment options is working at any point of time. As they say ‘sabka time ayega’ ! Once the asset allocation has been identified, the behavior discipline comes in, i.e. stick to the allocation – thick and thin and not to go overboard on any specific asset.

Even Debt Fails – Badly

A layman investor would think that debt / fixed interest bearing investments are safe. 2020 tested this hypothesis again. If one tries to go overboard, debt investments can result in a total loss. There were quite a few examples in this year riskier banks failed and a few debt mutual fund schemes were frozen. Debt is a place for safety and not for taking risks. For more details you may want to read our blog post of April 2020 > Investment in Fixed Income or Debt

Hedging helps – In Small Proportions

When hell breaks loose, Gold helps. It is an interesting asset which ends up being a friend in need. In good times, it may be sitting on the sidelines with close to no returns, if not negative. But when there is stress all around, Gold shines as an age old bearer of trust. We wrote this post in 2012 and have purposefully never updated it to see how it stands the test of time. 2020 ends up testing the thoughts I had back in 2012 and they still work Golden Path of Gold.

Always Bet Against US Recession

Yet once again when US goes through pain, it opens up its purse strings in proportions which no other country can match to bail out its economy. After all US dollar enjoys the status of being the reserve currency of the world. If any other country did a fraction of what US did, their economy would have been belly’s up. On a flip side, the huge dole outs result in channelizing cheap money to emerging economies. So we also rise with the tide. A material part of the crazy uptick in our wealth in 2020 has been owing to free money chasing markets. What happens if this reverses ? This is a question for another date and the only saving grace can be ‘Asset Allocation’.

Diversify In Not So Correlated Assets

All have heard an age old saying – never keep all your eggs in one basket. But investors end up piling up more and more similar types of investment options in their basket and have a false sense of Diversification security. The key to diversification is to invest in options which are not similar. One of the key attribute is ‘Correlation’, i.e. any additional investment option should provide a benefit of a different characteristic. After considering adding Gold & Debt investment in portfolios, additional diversification can be materially achieved via investing in geographies which are not having similar fates as your home country. Our November 2019 Blog Post gives out more data points Geographical Diversification – A Key Risk Management Strategy

Timing & Action – Mostly Futile Activities

The last on the list is that timing investments is such a futile activity. It comes with a hypothesis that one can forecast the future. I don’t know about the gurus out there, but I have found that I do not possess the godly skills of peeking into the future. The only thing which helps me is identifying my investment asset allocation which aligns to my goals and then sitting tight on it. I am aware of so many people who exited in Mar / April 2020 and are still waiting in a hope. These champs are gradually entering now into investments and I guess they would complain for years about poor investments returns. An honest self introspection would tell that a person’s own act is the mostly the main reason behind sub-par returns and doing nothing goes a long way in getting optimal outcomes. Funny, but true – I was reading a report by an investment house that the best returns were enjoyed in their portfolios by people who were dead or were inactive / gone missing.

2021 – What could it be ?

We are stepping into the new decade and I wish I knew what to expect. If I look back in all the decades which I have been a part of, each decade had its fair share of turmoil and growth. Be it the 2000-2010, where it started with the Tech Bubble and Global Financial Crisis. Or 2010 – 2020 with a global pandemic. Life now is very different then what it was a decade or two back. Remember the virtually non existing internet to every thing & every where on internet, smart phones, increased computing powers to innovative consumer products, increasing farm & industrial productivity. The list will go on and on. Taking an example from the past, I am sure with the scale of disruptions & innovations in the works, this decade would be very different from what we experienced earlier. There are so many things to watch out for atleast in 2021


This is numero uno priority and I sincerely wish that all those who are in the priority list, get it. Realistically, perhaps it may take the whole 2021 and beyond to reach the required level of inoculations world wide. And hope it works – fingers crossed.

Government Policy Reforms

Behind the scene and beyond, there have been tonnes of government policy reforms which have been initiated in last 18 months, starting from cutting of corporation taxes, reforms touching almost all sectors, including the most recent Farm reforms and Production Linked Incentives (PLI) scheme. Each of these reforms takes over a year to start showing effect and have a potential to have far reaching impact in 2021+.


Oil still continues to be subdued which is a blessing for India. This is one of the beasts which can add to the fortunes or derails Indian economy as India is almost fully dependent upon oil imports. We use it not only to power mobility in India but as a crucial raw material for many industries. Oil at sub $50 mark is acting as a tail wind. Not to mention, adding to government revenues too as they aren’t reducing the oil prices in the country and pocketing the gains into their kitty. Many may blame this act, but these revenues are helping in financing the dole outs in these tough time.

Interest Rates

The famous quote of Warren Buffet – ‘Interest rates are like gravity in valuation. If interest rates are nothing, values can be almost infinite. If interest rates are extremely high, that’s a huge gravitational pull on value’. And the world is being blessed by 0 or lower rates. From India stand point, we are experiencing record low rates which have already started to impact positively both for consumers and producers. It lifts demand for products and on the other hand also helps the producers to reduce their cost of production and eventually happier profits / expansion plans. For all those having a home loan can vouch that their monthly EMI savings have been a material percentage of their family budget, thanks to interest rate drop.

Engineering & Technology Upgrades

This is an ever turning cog-wheel, but 2021 and beyond may be at a different speed altogether. 5G internet is coming with internet speeds of minimum 100 times of what we are currently used to. The linked changes to our lives aren’t even imaginable. Look back and see if you could be reading this blog post on your mobile if you didn’t have that 4G internet / broadband at home ? The usage of Maps, ordering of food and cab services ? Or the rapid payments via mobile wallet and the shopping via Amazon ? If 4G made that possible, 5G may wipe all what we are used to so far making all what we saw in the sci-fi movies close to reality – it is now all going to be all about imagination & innovation. The people / businesses who are ready for this tsunami of change will greatly benefits and the rest may be either left out or disrupted. The world is just going to be a small digital village.

Ending Remarks

On that note, we would like to wish you and your loved ones a very happy 2021 and a start of a lovely decade ahead. A year full of aspirations being fulfilled, will lower uncertainty, more family time and happier holidays (beyond the four walls of the homes where we have spent most of our 2020). Minds and bodies which become more healthy & fitter and we leave the scars of the lockdown behind us. I hope (wish) that the kids return back to their physical school as that the experience of being together with friend and teachers can’t be replaced with any form of learning. I wish that all jobs are fully reinstated at full pay.

I also wish that we continue to remember the positive experiences that came across (the hard way) in 2020 – be it spending time with our loved ones, for employers to give their staff members the flexibility to work from where they want and when they want, for us to remember that our lives need to be fit to handle medical challenges and  not to ignore the mental fitness which is mostly ignored.

And lastly that we have a finite amount of time at hand – lets make the best out of it – be for us or the society at large.

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2 Replies to “Year End Note – 2020 – A Gateway to the Next Decade”

  1. sourabh agrawal says:

    Thank you so much for sharing all this info. Amazing write-up!!

  2. Puneet Agarwal says:

    Thank you Saurabh

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