Step 1: Ensure adequate insurance coverage: Every individual should have a sufficient health and life insurance cover. “Looking at the rising coronavirus cases in the country, quality healthcare and prompt medical treatment has become the need of the hour. An adequate health insurance cover is crucial to sail through the pandemic. A pure term life insurance is also important to take care of an individual’s liabilities like home loan, personal loan etc. in the worst case scenario of the death of that person," says Prashant Maurya, Partner, Citrine Financial Advisors, a Delhi-based financial planner.
Insurance companies have also rolled out a standard health insurance plan to cover expenses on treatment of Covid19 as mandated by IRDA. The policy named ‘CoronaKavach’ aims at covering hospitalisation, pre-post hospitalisation, home care treatment expenses and AYUSH treatment in case anyone is tested positive of Covid-19 infection.
Step 2: Create a contingency fund: “Covid times make it even more necessary to have a sufficient contingency fund in place," says Prableen Bajpai Founder, Managing Partner, FinFix Research, a Lucknow-based wealth management and research firm.
“Minimum of 6 – 12 months of household expenses including fixed liabilities should be either kept in savings bank or liquid mutual funds as an emergency fund," says Prashant Maurya.
Step 3: Goal-based investment portfolio: Financial planners have become conservative in their suggestions on where to invest during the Covid times. However they believe you should not allow panic to govern your decision making.
“ If you are thinking of moving away from investments like stocks and mutual funds, then you must reconsider since this can be a good time to strengthen their position in fundamentally strong securities," says Harsh Jain, Co-founder and COO, Groww, an online mutual fund investment platform.
Here’s what the financial planners suggest under different asset classes:
- Equities: “Based on your goals and risk profile, within the equity basket, you can take multicap and hybrid funds with a holding profile of low or no debt companies so that they are better equipped to survive hard times," says Prableen Bajpai. Invest in equities with a minimum time frame of five to seven years in a staggered manner.
For diversification purposes you can also add some gold through Sovereign Gold Bonds (SGBs) or international funds in your portfolio.
After you have made the provision for emergencies, continue with your SIPs. “ SIPs have been made for a volatile market. The Covid19 pandemic has caused markets to crash. Hence, SIP investors can get more units for the same amount bringing the average purchase price down which helps to increase the chances of avoiding losses and earning returns," says Harsh Jain.
If you invest directly in stocks, Jain advises to avoid the urge to go on a buying spree only because the markets are down. He says, this can be a good time to invest in good-quality stocks that have promising long-term prospects
- Debt: Given the low interest rates in the economy, one should avoid investing in any longer duration products since they bring higher interest rate risk. Additionally, be mindful of the credit quality in the funds. “ On the debt side of one’s portfolio should be in shorter duration funds with a portfolio spread across AAA and sovereign bonds," says Bajpai.
“For debt exposure, you can go for short term mutual funds, Banking & PSU debt funds," says Maurya.
At this juncture, investors are also moving to bank fixed deposits for safety and guaranteed returns. Financial planners advise investors to consider the taxation while making a move.
Your investments should strictly be based on your desired asset allocation. Also, don’t forget to review your portfolio regularly to do away with any low quality investment.