Use This Time To Put Your Personal Finances In Order
The coronavirus outbreak has slaughtered every asset class globally and there has been huge wealth erosion, with the Indian market tanking over 35-40 percent from its record high in just two months. With this pandemic outbreak having an impact on the global economy the stock markets are looking uncertain and volatile. It is tough to predict the direction of the market trend in the short run. The market has triggered lower circuits but at the same time, there is a sign of recovery also seen in the market as people are beginning to realize that the death rate of the coronavirus is not as great as SARS, and some of the other epidemics.
However, it’s important to remember that this is not the first time, there has been a market crash, and history has proven that we have always bounced back and emerged stronger. Life has put a halt on the monotony but even in this challenging situation, there is a silver lining. Here are few steps can be taken at this moment to put your financial puzzle pieces together to break your financial monotony :-
Build a financial cushion
Make sure that you have three-to-six months’ of your expenses saved in cash-like instruments Bank Account or Liquid Funds or FD’s which can be easily liquidated. Don’t look at returns from it, and ideally keep it our of your daily sight, for a rainy day.
Do not Panic, Stay put
Stressful times like these not only test the market but individuals too. Try not to be swayed by your emotions. Unless there is an immediate need for cash, please do not sell your assets out of panic. These are worst times to exit your investments and by doing so, you are converting your notional loss into real loss. Time in the market is more important than timing the market. Stick to your original plan of disciplined investing, don’t speculate or take too much information.
Plan your finances
If you don’t already have a financial plan for your family & personal goals, then this is the right time to act. Get in touch with your financial planner and build a financial plan. Investing should not be guided by specific moments; it should be a part of a process over time. Each rupee that you invest must have a purpose. A Financial Plan provides you that process and purpose, and it also keeps your emotions at bay as there is ample clarity on what are you doing and why are you doing.
Re-evaluate your risk tolerance
During happy times, we misjudge the amount of downside we can withstand. This is an ideal situation to reassess your risk profile. If you feel uncomfortable now then perhaps you have been taking more risk than you can handle.
Limit yourself to the basics
The present crash even though it is not owing to economic reasons, it will bring about economic turbulence. Chances are that only fundamentally strong businesses will sail through these times. Therefore it makes sense to stick to the larger companies and better-known names in times like these.
In this moment of urgency, it is important for an investor to not directly dive into the market unprepared but to sit patiently design a strategy to survive any calamities…because in Life each phase approaches us wrapped along with a meaningful lesson in it. While high returns may seem attractive, the very act of chasing them all day and night is rather not so easy. This is the time to average out the return on your total investments by focusing on your financial goals and objectives.
Article Written By:
Khyati Mashru Vasani
Founder & Chief Financial Coach
Plantrich & Vama Plantrich LLP