Preparing v/s Planning - What's the difference?

You've heard of financial planning, well, let's go through the basics.

Here's the difference:

• Planning assumes order. Markets go up 12% every year (statistically). Your SIP runs smoothly, your retirement fund grows as planned.
• Preparation assumes chaos. Markets will crash. Income may stop. Job loss happens. Emotions will be tested.

But what we do at BayFolio, is also prepare you. That's because when the markets are going up, and in the long term, they do - you can expect a certain direction. However, in the short term, investors forget, or some haven't even experienced chaos yet.

Remember Covid 2020 crash? Markets fell 40% in weeks. Some were investing for the first time and took the leap to start. Great! However, think about those who were investing from 2018, 2019? They did not expect that market could fall so much, it was as if the world was coming to an end.

Crashes do happen, every few years, and yet in the long term, the market continues to go up. Sometimes the market recovers fast, sometimes, it takes years.

But the bigger question to ask yourself, is when (not if) the market crashes next time - will you be prepared?

Ask yourself: Do I have cash ready to invest when markets are down 30%? Do I have funds on standby, that I can deploy at short notice? Will my income be affected during a crash or recession, that I'll have to stop my regular SIP? Can I continue my SIPs if my income drops? Will I panic-sell, or stay calm? Have I mentally rehearsed such a scenario?

What are you doing to prepare yourself?

Preparation beats planning, any day. The investors who survive and thrive through multiple market cycles aren't necessarily the best planners - they're the best preparers.