India is witnessing a full-blown bear market of this decade. The coronavirus pandemic has created panic and havoc in the market. The economic downturn triggered by the health issue has not only impacted the home country but tripped the world economy too. The Sensex has tanked more than 30% from the January month. We all are worried about how deep cut we’ll see in the market? For how long will it drop? No doubt! The concern is real and obvious.
Somewhere, in the current situation, we all are bothered about how to exercise our finances. Stock Market has crashed several times, but overcoming the same and managing the nuances of personal finance include some basic steps. If followed, then worst can be saved.
1. Having an Emergency Fund
The economy is paralyzed and hitting the market badly. Our finances are in turmoil, and hence, we need to be prepared for the same. A lot of businesses have wrecked severely. It won’t be surprising if the companies will retrench the employees and opt for salary cuts and delayed payments to restrict the cost. Already, a lot has been affected, and a lot can happen. We must be thinking of directly touching the Mutual Fund portfolio. But is it the first step? No, it’s not. Because the current downturn will not only shake our returns, but it will also pull down our income. Having a cushion for at least 6 months’ expenses is foremost. The equivalent amount must be kept in a safe avenue. Because taking a risk with the contingency fund is not recommended.
2. Extra cash? Then, Invest to Gain
Credits: AZ Quotes
Deploying money in a full-blown bear market is a tough task. It is pure pain. But remember my friend, if No Pain, then-No Gain. The pain swallowed today will be a gratifying fruit of the future. Because the crashed stock market is an opportunity to buy the shares at a discount. We all love discounts. Buying a favourite dress at 50% less is something we boast. Isn’t it? Then, why we hesitate to buy the Mutual Fund Units at a heavy discount.
COVID-19 has brought the Funds at a cheaper price, so it’s time to get back onto the saddle. Getting a steep cut is not common. The occurrence of such events is low. It’s a chance to make a profit. Because if you’ll wait till the market recovery, you’ll miss the bus. And if missed, then it’s gone.
The below graph shows the returns after the dot-com and subprime crisis.
Credits: The Economic Times
3. Stick to your Financial Goals
Although, investing in an equity market is always for the long term. Probably, the money invested will not be used in recent times. Then, it is highly recommended not to change your long-term investment strategy. Stick to the goal. Any alterations made amid the bear market can hamper your entire portfolio. The bear market is the time when the investor shifts their strategy and regret later. The negativity migrating from news and social media channels wreak the panic among investors. The overwhelmed emotions and unpredictable nature can hamper the planned strategy.
4. Discuss the Finances with your Family
The quarantine has brought the families together. Apart from gossiping about the coronavirus, the time should be utilized to discuss the finances with your family. Share the passwords of E-Mail ID, Phone, Bank A/c etc. with your spouse. Discuss the Insurance and Investment details. Your better half must be aware of all the relevant information. Plan your future with your loved ones. The decision taken along with the family is always better than the decision taken alone. It’s a great time to inculcate your family under one roof and discuss the status of your finances.