Trapped in our houses, sirens buzzing around, frustration at its peak, grim news everywhere. We have been in and out of the lockdowns for more than a year now as the whole world is battling coronavirus, probably a once in a lifetime event.
Pink slips being issued, salary cuts, and running pillar to post just to find a few litres of oxygen has been the story over the past year. The economy is on its knees and it's getting even more difficult for the common man to make ends meet.
But as they say, “this shall too pass” and continuing with this optimism today we will cover what your portfolio should look like for an epidemic or a pandemic.
“COVID will have vanished in 2 months”
“Mutual Funds don't have any risks”
In the current times, promises on profits are as bleak as the hoax statements that are mentioned above. When making your investment portfolio, it should be pillared around two things, your risk profile and your targeted returns. Ahh..enough of the theory knowledge let's move on to something interesting and practical.
Indians love non-risky, illiquid assets don't we? But the thing we don't understand is that these assets hardly manage to beat inflation.
Let us list down 3 options for you to prepare for any unforeseen events, like a COVID-19 or any other endangering calamity.
First on the list is...
We aren't fortune tellers that can predict what is going to happen in life. Emergency funds equal emergency savings. This is the type of fund for you to bank on when “life happens”. Emergency funds act as a stash of cash which becomes your go-to which will at least provide you with some cushion till you resolve your financial issues.
Now that we have your attention.. probably the next question in your mind would be how much should be allocated to this?
If experts are to be believed then you should have at least 3-6 months of your salary parked in an emergency fund. Common, don't raise your eyebrows, these funds should take care of your basic living expenses and not your daily Swiggy orders or Netflix subscriptions.
Important thing is that your emergency fund should be accessible and very liquid, and don’t invest in real estate in the name of emergency funds, it is not liquid.
Next up is...
Debt Mutual Funds saw an outflow of around Rs 84,000 Cr in 3 months ending March 2021, in which liquid funds had a lion’s share of 56% of the withdrawal. In simple words, liquid funds are a type of debt funds that will invest in very short fixed interest investment vehicles. To throw some examples, their portfolio may consist of treasury bills, commercial paper and so on. The maturity is of 91 days but the NAV (Net Asset Value) is calculated on 365 days, unlike other debt funds whose NAV is calculated only on business days. In lay man’s terms NAV is the market value of the investment vehicles those are held by that specific scheme.
Let us throw some light as to why people are moving towards liquid funds. Do you like risk in such a scenario? The answer would be a no, and therefore this is the best in this segment, lowest risk associated with interest rates. Another benefit of why this should be on your bucket list is that they don't have any lock-in period. This means that you can withdraw your fund and get the money within 24-48 hours.
Listed a few top-performing funds and highlighted their 1-year return below. As you can see the returns are decent enough considering the low risk involved.
1 kg of this in 1990 could buy you a Maruti 800
1 kg of this in 2021 could put you in the driver's seat of a BMW X1
Yes, you guessed it right
We are talking about...
Even a rupee’s investment in gold will hedge against equity markets, mainly because equity as an asset class is subject to a lot of conditions. The demand for this gold-class investment in India stood at 446.4 metric tons in 2020, which is a decline if compared to the numbers back in 2010, but this has not affected the value of the precious metal as the prices of Gold have shot up by 60% in just 5 years.
Warren Buffet once said, “Gold is a way of going long on fear” and what can fear an investor more during a pandemic?
Gold has always had a cultural and symbolic value and is used by Indians for various occasions, this is why Indians have always admired this asset class. The other reason for gold to act as safe heaven is the war chest of gold reserve governments and central banks hold, this instils trust in the investors.
You can invest in gold in many ways; people buy jewellery, gold ETFs, gold bars or coins, e-gold or even sovereign gold bonds.
Hope after reading this blog you have equipped your investment inventory and will call your investment advisor straight to get your portfolio modified.
So that's all we had to share today with you...
Until next time,
Happy Investing :)