Precautions to be taken by the investors during the time of COVID-19 crisis

The COVID-19 pandemic arrived with not only a health crisis but also an economic one across the globe. Many companies and organisations are announcing pay cuts, deferred payments, and are even laying off employees. Many countries are even sending the migrants back to their home country. NRI’s returning to India may face a bigger problem in future. However, taking a wise investment decision can help you in the long run.

The economy has seen the worst hit this year, leaving everyone puzzled and confused on how to save and where to spend. In such a situation, it becomes necessary to consider investing in productive avenues to prevent the pandemic from hitting your financial stability.

Here are a few points to keep in mind while investing during COVID-19: 

1. Holding Cash

Saving money while in COVID-19 economy is a wise decision as it can come handy at the time of need. However, it is suggested that you park your saved money in separate bank accounts and/or Liquid or Overnight Funds and don’t use it until there is an emergency. 

If you are an NRI, then you must hold your money in excess for future use. Due to Economic crisis you never if you ever get a chance to go back to the country you were residing in. 

What you should remember while holding cash is that you don’t keep excess of it or very less of it. Inadequate cash won’t suffice in urgent times and holding excess cash may lead you to miss out on good investment opportunities. 

2. Asset Allocation

Many factors determine asset allocation or distribution of investible funds among asset classes- equity, debt, gold, or holding cash. Factors include your income, age, financial goals, investment objectives and time in hand. Since time is crucial, it would be a good idea to review your asset allocation now as these factors might have changed with time. Investing in safe options can be preferable in the long run. As investment options such as equity and debts can be risky options to invest in. However, investing in Fixed deposit can be preferable. As your money is safe and gives you good returns. And if you are an NRI, then investing in NRI fixed deposit can be the best option for you.  It gives you various options; Such as FCNR deposit, NRO Fixed Deposit, NRE Account fixed deposit and much more. 

The biggest benefits of Fixed deposit for NRI’s is the Repartriability of their deposits.  You can invest in Foreign currency and get good returns on your investment. You can also repatriate your Investment without paying any taxes if you invest in NRE account fixed deposit or FCNR account.

However, in this time of economic uncertainty due to COVID-19, you must invest only after thorough research. Also, try not to over-diversify, else it will make your portfolio bulky and won’t add any benefit. 

3. Stay Invested

During COVID-19, it might seem that terminating your investments is a good idea as they would offer financial relief. But it isn’t at all a good idea, especially for certain asset classes such as equity and gold. Such avenues need a longer investment horizon to give considerable returns. 

Selling them might seem like a quick solution but it might jeopardise your financial wellbeing in the long run. Therefore, it is recommended that you continue with your investments in mutual funds and stocks and even increase your allocation.

4. Insurance

The most common step taken by people during COVID-19 is getting their life and health insurance done. Many upcoming insurance plans offer cover for corona infection. Opting for them is a good way to protect the wellbeing of your family and you.

Continue your insurance premiums; take it as an essential investment so that you and your family can enjoy uninterrupted insurance coverage. You might think of stopping your payments towards insurance premium during this economic crisis. But you shouldn’t do that since you’ll most likely have to pay a higher premium if you think of buying an insurance policy later.

Conclusion

During COVID-19 crisis, you must take the right steps to stay healthy and financially fit. Taking adequate precautions and measures as recommended above would help you manage your finances better.