Most of us as investors know thatas an class is market dependent and thus can be quite volatile, insanely so sometimes, in the short run. Unfortunately, knowing and experiencing are two very different beasts. Only those who have been for a decade or more are truly aware of exactly how different.
If you startedin -based over the past 4-5 years, the current state of the markets, thanks to the already afflicted Indian economy and the global COVID -19 pandemic, must be nothing less than shocking to witness.
Many investors have seen theirvalues diminish alarmingly. While it might seem like a calamity for investors in , it isn’t really the first time.
What you must be really wondering about is what exactly should you do? Here is a quick checklist that you can implement right away.
Yes, the health and safety of yourself and your family are priority number one. Before you worry about yourmake sure this aspect is something that you are ensuring is done well.
2. Ensure your emergency fund is topped up and if not, the next savings need to go here.
In times of uncertainty, anis your first fortification. If you have been a follower of this blog, you very well know how much we harp on this point. If you haven’t properly allocated some liquid as an emergency fund which is the equivalent of at least four months’ paycheque then combine your existing short-term debt funds, FDs and liquid funds. This is your interim emergency fund. Note the value down and ascertain how long can this last you.
Your long-term equity-based investments would have taken a hit but if history is any guide, the recovery (even if delayed) will help you get back on track. Keep your SIPs going as this will help you even more than simply staying put and not withdrawing unnecessarily.
3. Re-visit your asset allocation
Think of the current crisis and market situation as a hard lesson in the value ofaccording to your goals and ensuring an based on that and your financial situation. The money you for the long term should ideally not be needed in, at least, 5 years. It is for situations like these this adage is repeated again and again by experienced investors.
Youraka your fixed-income based instruments should generally be sufficient to fulfil all your planned short term goals. The time frame for these should be up to 3-5 years.
Your long-term-based would have taken a hit but if history is any guide, the recovery (even if delayed) will help you get back on track. There is also a chance that you might have to increase your savings if growth assumptions change going forward. Keeping your SIPs going for now makes more sense as this will help you even more than simply staying put and not withdrawing unnecessarily.
4. Consider increasing your savings rate generally
Difficult times like these are plagued mostly by uncertainty. Many are wondering whether social distancing initiatives are going to cost the economy. There are also rumours and fears of job losses. While none of this is certain, prudence demands preparation more than anything else.
Increasing your savings rate and cutting down on unnecessary big expenses that are not absolutely essential to your, or your family’s, well-being is one step you might want to consider especially if your industry is facing challenges. It would also be prudent to avoid taking on big debt at this point until and unless you are fairly certain of your income for the immediate future.
Stay safe, stay strong
Uncertain times like these make most of us doubt our decisions when it comes to. However, as long as you made your decisions keeping in mind your objectives and a realistic assessment of your income and savings, you should be in a much better position than what you might be feeling you are in.
Even if you made mistakes, there is no time like the present to learn and do the right thing which is simply saving andaccording to what you want to achieve, realistically, depending on the time available and growth assumptions that affect what you in.