Insurance and health cover is a must
It is in times like these that you actually realize the importance of an insurance cover. Apart from a cover for your life and assets, it is more critical to ensure that every family member has a health cover. Talk to your insurance agent and confirm that COVID-19 is covered under the plan. If required, you can add a rider, even if it entails a cost. COVID-19 treatment can be very expensive and health cover will be a boon.
Time to rebalance your investments
You may have looked at rebalancing as a routine exercise once in 3-4 years. This is the time to consciously do a review and rebalance. You are at a stage when equities are down 30%, mutual funds are facing outflows, and bond yields are edging lower. This is the time to take a granular look at your investments in consultation with your financial advisor. Ensure that your current investment mix is in sync with your long term goals and interim goalposts.
Keep emergency funds handy
You never know when you will require it. Transfer some money into liquid investments so that your emergency corpus is at least 3-4 months of expenses. This gives you greater mental and moral comfort to deal with any disruptions in incomes, expenses and other concomitant risk factors.
Should you opt for EMI moratorium?
There is no off-the-shelf answer. EMI moratorium is deferral so you pay interest for the 3 month period. Avoid EMI moratorium for personal loans and credit cards. You will accrue higher interest costs. Instead, opt for EMI moratorium on home loans. Costs are lower but have a plan to defray EMIs when moratorium is over.
Have a trade-off between SIPs and EMIs
Don’t get into a situation where you stop your SIPs and also opt for EMI moratorium. You are creating liabilities but not creating assets. If you opt for EMI moratorium, let your MF SIPs continue. If you are taking a break on SIPs, pay your EMIs on time. It is better to take a 3-month break in SIPs rather than stopping it altogether. That way, you don’t compromise your life goals.
Time to leverage idle assets
The lockdown does not mean that you should sell your investments. Look at other innovative ways of bridging your shortfall. You can take a loan against your idle jewellery and repay the loan after a year. If you have leased out your apartment, banks are willing to securitize rentals. That way, you don’t disturb your investments during this lockdown.
Rethink your budget during the lockdown
One way to handle the stress of a lockdown and the impact on your finances is to rethink your budget. The lockdown means that you don’t spend on travelling, eating out, entertainment etc. You can surely survive without these expenses, partially if not fully. See how much of these savings you can channelize into SIPs. Take your family into confidence.
Look closely at your investment costs
This is a call that investors have to take. Can they manage with a no-frills broking account? Are they comfortable with a Direct MF plan for the 125-150 bps cost edge? Above all, if inertia stopped you from disposing underperforming investments, this is the time to do it. Carrying laggards in your portfolios has a huge cost and is best avoided.
Refrain from panic buying
Now you may wonder how this is an investment idea. Firstly, you are living in times when the purpose is to leverage every rupee to the hilt. The last thing you want is to stack on home needs only to find that they are easily available at lower prices. Also, you end up creating unnecessary panic in the process and become part of the problem.
Finally, take yourself fully digital
If you can manage without visiting your banker or broker during the lockdown, then you can probably do it forever. Even ATMs should only be used as a last resort. Instead, rely on digital payment modes to the extent possible. This is the time to make a shift. Digital is not only smarter; it is also more economical and convenient.