Investment Lessons From Covid-19

It’s no secret that the world is grappling with the uncertainties caused by Covid-19, a disruption that would leave an indelible mark in the history of humanity, healthcare and economics. In this crises we have witnessed that even blue-chip companies can become vulnerable, you can also loose money even when you are sleep, and that debts can be really awful. 

While everyone is looking at this global crises only in a negative light, let’s not overlook that it is teaching the entire mankind some most valuable lessons. 

One such lesson that this crises has taught us is how to sustain. With the back-to-back lock-downs, we all have come to a realization that the cost of running a family is not as much as we always estimated. A lot of our expenses that we thought were mandatory are actually surplus. I presume that at least for a while, after the crises end and people strive to resume normalcy, this habit of having a minimalist approach would continue. This should be taken as an opportunity to save and invest more. As we all know money management is more about EQ than IQ. With everyone now having a clear picture of areas where we can save and areas where we need to spend, we can get our priorities right by increasing our EQ towards money, thus managing our expenses better than ever before. 

After you minimize your expenses, the next predicable step would be investment. Most of the households in urban cities today have dual income. So while calculating your finances (say if its 1 lakh or more per month), you need to ensure that not more than 50% of your income goes out as your expenses. Further, with the rest 50% you should focus on investing, 30% should be Liquid and rest 20% in long term investment plans. The amount that you set aside as liquid can be best invested in Liquid Mutual Funds as they give you higher returns as compared to FD and Banks savings account, you can also withdraw it whenever needed within 24 hrs. So in case of any eventuality, you can always rely on this fund. 

Diversify into different asset class

Financial advisers have always been reiterating that don't put all your eggs in one basket, and today with least expected assets like WTI Crude crashing, we have again learnt that there is no asset that we can rely on 100% with our investments. For instance, people always felt that Debt investment is safe because the returns it offers are lesser and companies it is invested in are fundamentally strong, but with Franklin Templeton Investments episode it is clear that even debts are prone to default so we should never ever put everything in one basket.

Invest in Gold

We have also learnt that you should always accommodate gold into your investment portfolio. Historically, we have seen that gold is one of the rare commodities that has given good returns during crises. Though we see the prices for this commodity were stagnated for around over 2-3 years, it made up for the losses in last 6-12 months, with prices scaling up by around 30-40%.

Have a strong contingency plan

This crises has also reaffirmed that certain conservative approaches when it comes to investments, have probably been the best way to go ahead with. Having a strong contingency plan to combat such situations where we witness economy coming to a grinding halt is the smartest thing to do. And traditionally it is been believed that a contingency plan cannot be complete without an emergency fund. You should always aim at being capitalized for 12 months at least, to help you sustain in case you loose your income sources. 

Invest in Family Health Insurance

I can’t insist enough on this point. From my team in the company to my peers, I have always been suggesting people to go for good family health covers as a major chunk of our savings and investments are consumed at the time of health emergencies. Covid-19 crises have again underlined the importance of this most understated aspect of investment. Yes, investment in plans that offer you multiplication of assets and good returns is wise, but its wiser to protect what you have. In case of any crises, we first look at protection to contain the repercussions and then move ahead to combat the damage, and a good health cover does just that. 

Finally, we have also learnt that every crises throws an opportunity. For instance, pharma is on its new high at the moment. So when selecting funds don’t confine yourself specific sector. Also, the most vital element underline by the crises is to any adverse eventuality effectively, financial preparedness is of utmost importance and that can only be achieved by consistently reviewing and upgrading your investment plans.