– ANIL MATHUR –
(Investment Consultant, Alchemist Wealth Management, Jaipur)
Suddenly, our life has changed upside down. Our daily routine, behaviour & views about life have changed without great efforts and we are hardly complaining about this. 21 days of lockdown will end tomorrow and soon we would know how we proceed from here.
Ever since PM Narendra Modi announced 21 days LOCKDOWN on March 25th 2020 in order to contain spread of Corona Virus in India, we in financial markets have a life changing experiences. Our daily used terminology and words are hardest hit. GDP is replaced with Hydroxychloroquine , Growth is with Quarantine, Interest rate with N95 Mask & Fiscal Deficit with PPE Kits. Our daily tracking of indices is also changed. Now we track No of COVID19 Positive against Nifty, No of Recovered for Sensex. Daily FII figures in market are replaced with death due to Corona and DII figures are replaced by PMCare Fund. No one would have ever imagined that we would be having our official meetings on Microsoft Teams wearing shorts under shirt & tie. Will be attending webinar’s lying on sofa or even having client meetings from bedroom on zoom !! A standard wish, you don’t give enough time to family is being fulfilled.
This is what COVID19 did to us. India along with entire world is fighting this new enemy who has caught all of us off guard. World have seen so many crisis in past 100 years, epidemics like SARS, AIDS or Financial Crisis of 2008 or many before. In past, the crisis were of either Health Hazardous or Wealth Hazardous nature but this time it is combination of both, a deadly cocktail. This is certainly a wake up call for all of us. Don’t bogged down yourself with useless debates about what Trump or Modi should do or shouldn’t, how China or Italy should have handled COVID19 or what should Finance Minister or RBI governor should do at this time of crisis. They will do what they feels best, they have enough people to help them in taking decisions. Stimulus Package will come when government feels need for it not when we want it to come. We absolutely have no control on them but certainly does have control on our own decisions and choices we make. The COVID19 crisis will have very limited or no affect on Super Rich & Poor but will hit middle & lower middle class. There will be disruption in their professional life going forward. 21 days of lockdown will make people more aware and cautious about how they spend money, lifestyle and social security. Markets are down 30-35% from peak, Indian rupee is weakening, business will suffer due to lockdown. Economy will take a hit if corona pandemic is not controlled soon and lockdown is not lifted partially immediately and then in stages with overall progress. COVID19 has also opened a whole lot of opportunities for India. World will transfer many eggs from Chinese basket to India, a barrel of crude oil is selling at the rate of a whiskey bottle, Foreign governments are pumping trillions to save their sinking health & wealth, we shall get our own share of benefits from it. So lots of positive things are in store and outcomes will be visible in 6-9 months. I call this current crisis duration as Navratra to Navratra crisis ( March – October). Things should be much better afterwards. This brings us to a critical question, Are we prepared for such crisis in our personal life?? Did we have our financial plan in place to negate challenge this crisis has thrown at us?? Lets put ourselves to test by analysing our preparedness on two criteria of financial planning.
# Investment & Goal Planning :
In coming months many of us may face cut in remuneration for a few months. This will put us in spot as we have to pay our EMI’s, monthly bills & fix expenses. Do we have enough emergency fund in bank or liquid fund which can take care of these expenses? Are we among those who are looking for three months moratorium for housing loan EMI or rushing to advisor for stopping SIP which was started for daughters education? If answer is yes, we have some serious problems in our planning and must see advisor to fix it. Did I hear you saying, I am stopping SIP because markets are down and can’t take risk!! Sorry, were you not aware of the fact that markets are risky, how come you landed here?? Stopping SIP at this stage for market conditions will be worse decision one can ever make. Please contact your advisor and understand why at this point one should continue long term SIP. Assuming markets have fallen average 35% and your portfolio is down much more than 35% , you must re visit your portfolio. It surely lacks asset allocation and safety net. Are you the one who came in the market’s before high of 2017-18 and made some money on short term basis and suddenly realised that you don’t need anyone to advise you and started investing directly in fancy equity funds and also took a rocking mobile application to trade in stock market? I am sure you are the one who is holding Yes Bank in your stock portfolio which you started buying from Rs. 270 to Rs. 5, averaging at every fall and still holding it becomes your rate has yet not come. Your Mutual Fund portfolio is pact with small cap funds accompanied by some mid cap funds with no asset allocation and diversification. In such case, Your portfolio need immediate attention to give it a better shape and strength. Are you one amongst those who started investing in mutual funds with 15-20 year goals like daughters education or funds for your own retirement but suddenly want to withdraw all the money as you don’t find it safe anymore and put everything in FD? Pause a bit !! Markets are cruel, they don’t give second chance for a come back. Yes, markets are down, so is your portfolio. However quitting here means converting your temporary loss to permanent loss. No one knows when recovery will come but are sure that it will come. However no one is sure that it will never come back, so why can’t we just wait. Investment is a serious business, leave it to experts.
# Protection Planning
During these 21 days of lockdown there must be some moments when you were sitting in a corner alone thinking about what will happen in future? What if I don’t have job? What if Coronavirus hit me or my family or something happened to me. Time is not to worry but to take action. Have you bought enough protection for your family? An adequate health insurance of your own which can take care of any medical expenses at these time of crisis. A term life insurance cover for self which can take care of your families expenses in your absence. If answer is NO, please buy adequate protection immediately. COVID19 is a wake up call for all of us. We need to revisit our Investments, financial plans and ensure that all our resources allocated wisely. CORONA will go sooner than later, today it is corona, tomorrow it could be something else. We can’t be complicit with our money, we need robust financial security around us to face any future challenges.