The novel coronavirus has had a huge impact on almost all industries over the globe. At a macro level, the impact of COVID-19 has been profound. The pandemic has affected both global and Indian markets. The virus that has spooked the world’s markets and sparked fears of a global recession, has also played havoc with India’s macro indicators.
Not only this, but several restrictions such as lockdowns have also shut up many businesses, curbing the money flow in the economy. The virus can surely impact your money and the future of your wealth. In times like this, financial planning becomes even more important and how you manage your money is crucial to ensure financial stability.
Several questions have arisen to as to how to manage your money during the pandemic while you’re in lockdown, and we try to answer a few of them
Is the right time for you to buy certain shares?
With stock markets being extremely uncertain, many people are uncertain about what should their next step be. Since the markets are down right now, it also may be the right time for you to invest in stocks of business that you see may do well in the future. Take for example stocks of OTT platforms like Netflix, Disney etc. The present time is good for them because people are sitting at home and consuming high levels of content. They’re discovering more content on platforms and may continue to watch it even after the pandemic eases out. This may bode well for such companies and now could be the right time to buy their stocks. Similarly stocks of hygiene products, pharma companies, e-commerce etc. could also be looked at
Should you be investing in it?
The outbreaks of SARS, Swine flu, Ebola and others provide an insight on how financial markets react to pandemics. In each case, they saw an initial sell-off in the markets, but they quickly bounced back and offset the losses
There’s a case to be made for saying that investments should be made when the markets are down. Warren Buffet has long propagated the buy low sell high policy. However, that holds true in traditional patterns, when maybe one variable is impacting the performance of the markets. But in a pandemic such as this, it is very difficult to predict what the future will hold as this situation is unprecedented.
This is surely a good time to invest only if the market stabilizes. Buy then and hope that it will rise later as the world recovers from COVID-19. If you’re looking to invest, think of it from a long term perspective only, minimum 1-2 years. This time could also be an opportunity to diversify as well. Diversify your portfolio to maintain a balance, investing in multiple different industries to reduce your risk.
What If You Have Invested Money In Mutual Funds
You may want to continue with your mutual fund SIPs to meet your long-term financial goals. A falling market could also mean you buying more mutual fund units at a discounted price if you continue with your SIPs which could garner higher returns when the markets bounce back.
If you’re an investor who is running low on liquidity in his overall portfolio, redeem from funds and create the required liquidity, irrespective of market levels. On the other hand, if you have sufficient cash to tide over these uncertain times, you could also consider fresh allocation. But be sure to withstand further volatility in the future in the short term.
Maintain Liquidity and Keep Emergency Money Handy
Maintain liquidity to ensure you have a lot of liquid funds. This is because, in uncertain times like these, you never know where and when you may need the cash. In such a scenario, it makes sense to increase your emergency fund. Ideally, your emergency fund should be worth at least 6 months of your expenses, but you may want to increase it further in these times to be in line with your requirements and responsibilities. Your emergency fund will come to your rescue if there’s any loss of income in the near future arising out of this pandemic.
Pay Your Dues on Time
The RBI last week allowed banks and other financial institutions to provide a moratorium of three months to all term loan borrowers. This was done to provide relief to borrowers facing liquidity issues. You could read more about the announcement here.
While to the common reader it’ll mean that financial institutions are permitted to allow a moratorium of 3 months on payments of instalment on all credit card dues between 1st March 2020- 31st May 2020, there’s a catch.
The moratorium does not apply to interest charges. An e-mail by CRED, a reward-based credit card payment app to its users explain the repercussions. Assuming that you have Rs. 1, 00,000 due in the month of March and you decide to take advantage of the moratorium. However, by the end of the period i.e. 31st May your dues could be as high as Rs 1, 15,000. This is because the due amount will now include interest amount and other charges as well. Therefore the company has recommended its users to continue paying their credit card debt within the due date. This will save 36%-42% via compounding annual charges.
So these were some tips on how to manage your money during COVID-19. If there are some any other suggestions, comment below to spread some valuable information!