The Dos and Don'ts for Your Investments in the Lockdown Period

The world economies have seen depressions before which have caused a destruction in portfolios and personal wealth of people. Investors have often lost huge amounts of money due to such depressions. However, it has also been seen that eventually, each of these depressions is followed by a boom in the markets when eventually things return to normal and thrive.

Hence, there is always a strong positive movement which follows the downfall. It depends on you whether you choose to be affected by the depression or remain optimistic and look at the long term picture.

The situation right now is a similar one which may raise questions on what should be done about investments. The answer is fairly simple – Stay invested in strong instruments.

Let’s have a look at the top dos and don’ts regarding your investments, in wake of the current situation.

What to DO with your investments?  

1. Do Keep Money Saved for Emergencies

While this point isn’t related directly to investments, but it is an extremely crucial issue for your financial planning. If you are currently working or your business can continue in this situation, it is extremely important that you plan for any sudden emergencies. The sudden bear markets often make a deep impact on people’s earning capacities and it is an ever looming threat that your income too might get hampered. If not that, the risk of infections and cannot be neglected and it would directly mean isolation in which it can become difficult to work. Hence, before planning any investments, you have to make sure that there is sufficient emergency fund in store.

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2. Do Make New Investments in Quality Blue Chip Stocks

If after having set aside funds for emergency, you have amount which can be investment in the markets, then use it to make investments in new avenues such as quality blue chip stocks which are available currently at very reasonable valuations. You can easily purchase equities of some of the big names of the markets for relatively lower costs. Trust companies which form the essential part of a country’s economy or the society such as FMCG sector, technology sector, infrastructure etc. These stocks and sectors form the backbone of any economy and are sure to recover and surge forward once the pandemic gets over, thus appreciating your wealth.

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3. Buy Gold as Your Investment Portfolio

While equities will give your portfolio the boost it needs, gold would help in protecting a part of your investment capital from any sudden downfall. Hence, do not forget to invest a part of your investing capital in gold. Gold has always been a safe haven for investors and in most cases has an inverse relation with equities. Gold should be purchased by buyers at every dip in situations like these.

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4. Increase Your SIPs

If you have money invested in Mutual funds, you must be seeing your Net Asset Value going down, and this might sow the seeds of exiting your investments. However, remember that this is the tie to increase your allocation to your mutual funds and buy more units as they will eventually recover and will help you in generating more wealth.

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5. Keep in Mind That Markets will Take Time to Recover

The most important thing to keep in mind is that you should not expect the investments made by you to suddenly show profits and start appreciating. The present situation of the economy is still under pressure and there is a chance that there might be a second wave of Coronavirus which may impact economies in much the same manner as this. Hence, be mentally prepared to wait for the investments to grow and appreciate.

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What NOT TO DO with your investments?  

1. Don’t Check Your Investments on a Daily Basis

If your money is already invested in mutual funds or equities or any other investment avenue and is facing losses due to the current situation, then it is best to not look at it every day since the situation is not the best right now. If you do not need the invested amount immediately, it is best to wait for the markets to turn bullish again before thinking about withdrawing your investments. Constantly revisiting your portfolio will only serve to cause more harm to your mental peace than to help you financially.

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2. Don’t Exit Your Investments in Panic

On seeing a negative valuation of your investments, if you are planning to withdraw your invested amount, then that too is a big NO and should be avoided at all costs. Also, if your money is invested in mutual funds, it would not be a wise step to completely stop paying your SIPs right now. Remember that the markets will recover after this fall and your investments will rise again. But you need to remain patient till then and not take any sudden rash decision

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3. Don’t Utilize Your Full Investment Capital for New Investments

While you should take this opportunity to start new investments, but you should not invest your entire investment capital in one go. New investments, whether they are in equities or gold or debt or mutual funds should be made in a staggered manner after considering all aspects related to the investments. Spread your investments over a longer time period to make the most of any fluctuations which might be favourable, presenting a more lucrative buying opportunity.

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4. Don’t Watch News too Much and Don’t Base Your Opinion on it

Watching too much news can also be harmful for your opinion and perspective of what is important and what’s not. The current situation is quite gloomy and the news more often than not portrays a small development as breaking news. In such cases, your judgment as a long term investor can get hampered and hence, it is wise to not take the news too seriously.

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5. Don’t Forget About Your Optimum Investment Allocation

While this is the time to make new investments, it is also necessary to remember and understand what the optimum portfolio structure is for you according to your needs. You need to do a complete risk analysis based on various factors specific to you and only then initiate new investments sticking to the asset allocation suitable for your needs. Only then your investments can turn out to be successful.

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CONCLUSION:

In the end, it is extremely important that you remain financial aware and agile in this time and make the most of this time to make the right investment decisions which are beneficial for you in the long run for your family and overall financial well being.

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