Nudge your New Year resolutions

I remember seeing a cartoon a few years back where the aliens would be questioning human intelligence for celebrating the New Year, in their words', it's just a full circle made by the planet. Many make resolutions at the beginning of the year and most fade out by the end of the year. While it's always good to make plans or goals for the future, it should be substantiated by actions, habits and behavioral changes. If not, nothing changes except the date, month and year.

Enough surveys were conducted and the statistical results show that about 80 per cent of all the resolutions fail by the 2nd week of February. A survey conducted in the US among 2000+ adults published by Statista about America's top New Year resolutions for 2020, the most popular being 'manage finances better' with 51 per cent respondents voted it while 'eat healthier' has remained tied at the top. Don't know if any follow up survey was conducted but the last year's pandemic and the subsequent events have indirectly contributed these resolutions to achieve.

Past year was unprecedented in many aspects while it created lots of obstacles had also provided opportunities. Though, the lockdowns have restricted people to stick to their homes for a larger part of the year, it also helped them to consume better and healthier food. For many of the savers, it turned out to be a blessing in disguise as the limited travel and commute buttressed their saving capability. It's a different thing if they managed to channel that into good investment decisions and practices.

While the markets operate over the demand and supply dynamics, investors' emotional experiences oscillate between greed and fear resulting in gain and pain. Last year had enough such roller-coaster rides across the asset prices. We witnessed possibly the shortest bear market in the equities' history which later translated into one of the fiercest bull rallies across the major equity markets. For a brief period, oil prices ventured into unchartered territories of negative prices ensuing chaos. The near coordinated effort by the governments and central banks has stemmed the rot and ever since has begun a great reversal.

The continued dovish and accommodative stance by the central bankers despite inflation breaching their comfort zone in the last few months is only further fueling the rally in the riskier assets including cryptos. The pandemic possibly has reset the way governments and central bankers look at debt and altered the policy going forward. These excesses coming on top of the easing and asset purchases by the central banks during the previous crisis (GFC) would certainly have repercussions in the coming years, only how is the moot point.

I would like to view the new year as a year closer to an existing goal and thus a point of reflection on how much of it is achieved. Instead of aiming for an overhaul of change in habits, it's better to seek for small yet rather incremental changes towards investing. As Richard Thaler shed light on the individual's struggles to balance the long-term and short-term planning while succumbing to the near-term temptations, a small 'nudge' goes a long way benefitting individuals. These seemingly small charges could contribute to a larger effect particularly concerning to the savings for long-term goals like retirement.

This new year, take a resolution to approach every new year to reflect on the past year and make small changes that help in a great deal. For instance, if one is saving for retirement through a systematic plan, ensure there is an increase of 3-5 per cent in the contribution each year so that it doesn't pinch much for the increased savings but go a long way in ensuring the goal is reached. Also, create a portfolio that has a something of almost everything which adds zest to the investment experience. As I've been using this space to augment the portfolios with non-traditional avenues so that you've a foot-in-the-door to the future developments. As the reality changes, we need to be responsive and sensitive to them by having exposures to these progresses directly or indirectly.

(The author is a co-founder

of "Wealocity", a wealth

management firm and could be reached at knk@wealocity.com)