We are all spending a disproportionate amount of time trying to figure how the world will be after this Corona saga. Some may work from home; some fear deeprecession; some feel complete government control of our lives, what will it be, we just don’t know!

However, we all love living thinking about an uncertain tomorrow. The idea is, there is a better place to go to, and that somehow it will all be different and nicer. So, we imagine we will holiday after retirement; get fit some day in the future; and begin saving and retire our debts for that bright tomorrow. Our resolutions for our post covid-19 world are also quite similar. They help us cope, deny, forget and escape current realities. Every crisis has created something new, nice, big, inspiring, and enabling us to leap ahead. Such is the power of human innovation. But that path is n’t linear and such is with equity markets too.

Financial Do’s and Don’ts during the COVID-19 CRISIS

The Indian market has been experiencing its worst sell-off for the first time in over a decade, and investors are on the run to secure their investments amid the market downturn caused by the Coronavirus pandemic. Also, with BSE Sensex having plunged by over 30% in the last few months, Indian investors are on the lookout for options to survive through this challenging phase.

Here, are a few principles, if followed right, can help investors sail through the bear market and protect their investment portfolio:

  • Do make informed decisions:

The number of people who are successful in investing are only a handful. The reason for their success is because of a successfully laid down plan in place by them. The most important thing is to implement the plan and follow it fully. Making the decisions to buy and sell have to be well thought out with valid reasons and not be dependent on the price movements. Most people buy when markets are rising and sell when the markets tank in fear of losing their money.

  • Do understand the options available to invest:

Investing in equity does not mean investing in only shares of a company, or earning by doing trading in shares or derivatives. Investing in equity is partnering / becoming part owner of the company in which you are invested with an objective to earn return over a period of time, at least three plus years. To participate in equity, you can invest via equity shares, mutual funds, structured products, unlisted shares and the list can go on. Each one has its own set of risks and rewards which often are underestimated.

  • Do be patient with your investments:

People who invest in equity markets are generally not patient with their investments and always compare it to traditional fixed deposits mostly when it is down or not doing well. They reconsider their decisions to withdraw from their existing investments and move back to FDs which would have fetched a little higher return. However, it is only after a few years they realize, that the opportunity they lost was actually worth the wait and the opportunity lost was almost double the return they could have eventually got, had the investor kept some patience. Compounding works best with time, so higher the patience, higher the probability of generating higher returns.

  • Do keep at least six months of family expenses:

I advise clients to keep at least six months of the family expenses handy for any unforeseen events. Having this financial cushion is of utmost importance, however a person may choose to keep a higher amount depending upon the age bracket that one falls into and the industry a person is working in, which may have been worse affected like Airline, Tourism, and Hotels among others. Keeping the above may help you reap benefits from your investments once the market recovers.

  • Don’t follow the herd, relying on tips from friends:

In my professional experience, I have come across many instances where people have invested or want to invest because their friend has invested in Reliance, Infosys, etc. type of stock or participated and recommended to buy a particular type of mutual fund. People just buy it without understanding the risks and rewards associated with it. Even if the recommendation is right , there are several other factors which are important like Quantity, Price and the most important thing is when to exit (whether successful or not).

  • Don’t get scared to invest in equity markets:

People are not interested to invest in equity markets since there is no definite return like in fixed deposit of a bank. There is a myth that an investor may lose their hard earned money if the market falls without realising that there are enough tools available which guarantee protection to your investment on the downside, no matter where the market goes.

  • Don’t let emotions and greed rule, to time your entry into markets:

While we are not sure when the current situation will hit bottom, people are advised not to time their entry anticipating to catch the market bottom. Also, you need not invest all your funds in one shot. You can consider spreading your investments into the market in a staggered manner spread over a few months. This will help you balance your investment portfolio more efficiently. Don’t keep excessive cash at hand as it may not help you counter the inflation and you may lose an attractive opportunity of getting into the market.

Conclusion:

From the above, we conclude that there is definitely a lot of things to be kept in mind while considering our financial decisions especially under current crisis. While we all take prudent decisions on our finances, however, those maybe taken based on the limited knowledge which a person may possess. Hence, it may be a good idea to evaluate your plan with an advisor to have an external opinion who may provide additional points to your financial plan. It is very important to keep personal inflation in mind before taking any investment decision. Inflation eats into savings over the longer term. The current corona pandemic is a tough time for all of us, however it is said that tough times don’t last long however tough people do.

(The Author CA RishabhAdukia is a qualified professional and can be reached at adukia.rishabh@gmail.com)

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Qualification: CA in Practice
Company: Adukia & Associates
Location: MUMBAI, Maharashtra, IN
Member Since: 19 Aug 2019 | Total Posts: 11
The author Rishabh Adukia is a Chartered Accountant and qualified professional advising on wealth management to individuals, millennia’s, emerging HNIs including others and can be reached on adukia.rishabh@gmail.com View Full Profile

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