By Ashish Modani

As we enter 2020, it is not just a new year, but the beginning of a new decade. You may see a lot of changes in a year, but literally everything changes in a decade in today’s world. And your financial world is no exception to this rule. Here are some changes you can anticipate in this decade and how you can be prepared for them.

Currency is changing:

Thousands of years before, humans used to live in small tribes and economic activity used to be conducted through the barter system. Exchanges used to happen with goods and services. You will give me wheat and I will work as a carpenter in your house. From tribes, humans then lived under dynasties and exchanges used to happen through coins of those dynasties. For thousands of years, coins remained the way of exchange. Coins made of stones to coins made of metals – gold, silver, brass, etc – and we called them “Ashrafis”.

In the 18th century, with the starting of the industrial age, dynasties gave way to countries and currency shifted from coins to paper notes and each country had its own currency printed on paper. So India has rupee, the USA has a dollar, the UK has pounds and so on.

But today, the world has just shrunk. You don’t even realize when your neighbor has returned from a four-day trip from Hongkong. It’s just too normal nowadays. In short, the world is now a trading place instead of tribes, dynasties or countries. In a business place called WORLD, the currency would be digital and by the end of this new decade, cash would literally get evaporated. Many countries will make it mandatory to deal digitally.

If people still don’t believe the change, they will face the music.

Family structure is shrinking

My grandfather had six kids, my father had two, and I just have one kid. The family size is shrinking. Youngsters prefer to get married late and most do not want to have more than one or two kids, many prefer to have only one kid. This trend has at least started in urban India. Both the cost of living and standard of living has gone so high that it is becoming difficult to have a big family and hence preference is for the smaller one.

My grandfather’s kids, when they grew old, wanted to have their own houses for living and for investment purposes. But I inherited my father’s house. So, the house was not my priority. My kid, when she would grow old and gets married, would have two or three real estates from my side and maybe from her in-law’s side as well. She is unlikely to look for another real estate.

Size of Real Estate is getting smaller
To extend the above theory, my grandfather had a haveli spread in bighas, whereas my father has a bungalow in square yards. I live in square feet in a high rise apartment. So, the consumption of land is getting limited. God may not be producing any more land but the sky has no limits. With technological improvements, we are going to make very high-rise buildings in lesser area of land.

Tax evasion is getting difficult
It is no brainer to say that how technology is going to make the financial system cleaner day by day. You may not be able to see the camera but the camera can surely see you. So, the creation of cash that used to be deployed mainly in physical assets will come down drastically.

Financialization of saving
In the last two years, we have already witnessed a preference for financial assets than any other asset class. The trend is likely to pick up as investors will start liking the ease, convenience, liquidity, and other benefits. Also, there will be a nudge from the government. There will be many options like mutual Funds, NPS, ETFs, AIF, PMS, Bank Deposits, Government Schemes, etc.Within these assets, market-linked assets would occupy a major portion of investor’s wealth as they would eye for more return on investments.

Rental Space may see bubbles
Indians are used to products with guaranteed returns. However, there is already a dearth of such products. And many individuals are looking at rental income from commercial properties as residential rentals have already fallen drastically. This is going to create huge supply and demand will not match up. I believe oversupply would drag rentals much lower and many investors are going to get stuck again with illiquid assets just as they are stuck with real estate. More trouble would be for those investors who would take up a loan to build a rental property. Rentals would go down and the EMIs will start hurting them.

Returns won’t be higher
As India would transition from a developing to a developed economy, inflation would come down and correspondingly interest would be lower. In a low-interest environment, higher returns would be very difficult to come by. Wealth will not be created by getting a higher return on investments, but by saving more money. At the same time, a lower return would not mean bad return, when adjusted with a lower inflation, lower returns are justified.

It is important for you to understand that we are moving towards 2030, and not 2010. Changes are going to happen and those who adapt to changes will come out as a clear winner. In the end, I would like to quote William Arthur Ward here:
The pessimist complains about the wind; the optimist expects it to change; the realist adjusts the sails.

(Ashish Modani is the founder of SLA Financial Solutions, a wealth management firm based in Jaipur.)

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