The Biggest Personal Finance Trends You Will See in 2019
Personal financial planning is an exercise which is unique for every person according to their monetary goals in life. Some like to safeguard their financial plan through traditional options, including EPF and PPF while the others may prefer to opt for market-linked products that carry higher risk and bring higher rewards. Apart from the risk appetite of the investor, a lot of factors affect the personal investment scenario and contribute to the forthcoming trends in the near future.
As the current year is about to conclude, personal finance trends are likely to be shifted. Let us see what 2019 has in store for investors.
The number of mutual fund investors will decline
Equity mutual fund investors lose up to 34% in the past one year. – Economic Times, Sep 28, 2018
Investors, who have invested in equity mutual funds through SIPs in the past year, have faced losses because of extended weakness in the stock market. Small-cap funds have seen the maximum dip followed by midcap funds and multi-cap funds. Though financial planners and gurus suggest investors to alight equity mutual funds within a longer time frame, a minimum of 5 years; investors would get discouraged by the negative returns in the near term. The general election in 2019 has aggravated this concern of investors. Election usually tends to make investors change their investment strategy and next year is not going to be an exception. It is not a secret that election results do pull the stock markets down, but they are only a temporary dampener. In the longer run, investors should not worry, a fact all financial advisors suggest in unison.
More people will insure themselves and their family
Insurance penetration in India increased to 3.49% in 2016-17 from 2.71% in 2001. – TOI, January 2018
Though insurance penetration in India is much lower than the global average, it has risen significantly in the past few years and is expected to reach wider Indian populace in the next year. The insurance industry in India is expected to reach US$ 281 billion by 2020, driven by increased awareness among investors, innovative products offered by insurance companies. As life insurance penetration has risen from 2.72% in FY17 to 2.76% in FY18, more people are likely to purchase life insurance plans in the next year also. People need to be fully protected from unforeseen circumstances caused by the death of bread winner and only the right insurance plan with sufficient coverage can help them to stay protected against rainy days. Due to their lowest possible premiums and higher coverage, term plans will continue to be a popular choice among life insurance plans.
Life insurance industry saw its annualized premium equivalent (APE) at 7% year-on-year for the first six months of the current financial year with private players witnessing the higher growth at 13%. – The Financial Express, October 2018
There is no doubt that 2019 will observe increased growth of the life insurance industry with more participation from the uninsured population and superior product solutions.
Health insurance
Healthcare costs are skyrocketing, especially if we consider the actual cost of treating life-threatening diseases, chronic illness and emergencies in urban India. The figures are likely to escalate with time and are irreversible in nature. The rising healthcare expenditure and massive bills are pushing people to opt for health insurance. The trend is likely to accelerate with the launch of Ayushman Bharat – National Health Protection Scheme, launched in 2018. The scheme deserves a special mention here as with this the health sector in India stands to gain like never before. Ayushman Bharat will potentially benefit nearly 100 million families by providing them health insurance of up to 5 Lakh per year. Moreover, the remaining population would hush to protect their families under some kind of health insurance coverage.
According to the National Health Profile 2018, around 43 crore individuals or only 34 per cent of India’s population was covered under any health insurance in 2016-17. The remaining 64 per cent of the population is a huge customer base for the health insurance sector. – Down to Earth, September 2018.
Real estate will accommodate to the latest changes
Real estate has already observed a rapid change due to multiple factors including demonetization, RERA, GST implementation, and the new ICBC guidelines. Although the regulatory changes have positively affected the industry in the longer term, frequent jolts in the last four years have massively blown the industry. It has impacted the pace of construction of projects. However, the positive aspects of the reforms have transformed the market which has attracted the eyes of domestic as well as foreign investors. Developers are expected to revamp their business models in the new year which is likely to bring more confidence to investors.
ULIPs will get an edge over mutual funds
When it comes to tax planning, Unit-linked insurance plans have got an edge over mutual funds. The reason is that investors need to pay a long-term capital gain tax of 10% on equity-related mutual funds. But there is no tax on unit-linked insurance plans under the new regime. The new tax-regime has driven a portion of inflows from mutual funds to ULIPs, and the trend is likely to continue in 2019. What is attracting customers to ULIPs? The reasons are – low charges as compared to mutual funds, guaranteed and good long-term returns, flexibility to choose asset allocation depending on the risk profile of investors. Best of all the worlds!
What to do as a smart investor?
Systematically allocating funds towards different financial goals is the best way to deal with financial market volatility. If you are looking forward to building your savings, it is wise to allocate to equity assets to generate long-term capital. Divide your savings into different financial avenues to generate a stable income in the long term.
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