Covid Impact – What to do with your Investments?

Currently we as humans are facing the biggest crisis of our lives. None of the living generations of people have seen a crisis of this magnitude. None was expecting that Covid-19 will create such a disturbance to our lives, stock market is no exception. The market meltdown has wiped out last few years of returns for Investors.

If you are thinking of selling now and reinvest when the market stabilises, please refrain from doing it. Markets eventually will go up, but we don’t know by when. By selling now you are converting your notional loss to real loss.

If you have invested for long term, then no need to panic, instead you can try to set the portfolio right by doing whatever is appropriate for your Investment Policy / Goals.

1. RE-balance your asset allocation; I am sure due to the sell off your asset allocation would have skewed towards to debt or gold. Imagine your asset allocation is 70 in equity and 30 in debt, now due to the meltdown the current value of your Equity portion would have come down. In this scenario, if your time horizon and risk allows you can switch part of your debt investments to Equity.

2. Exit from Dividend Schemes; if you are in highest tax slab due to the recent tax changes you might have to pay more than what you have been paying as tax from your returns. This is the right time to exit Dividend schemes and move to Growth option. You can read more on this here http://www.fundwallet.in/to-be-or-not-to-be-dividend-vs-growth/

3. Exit Under-performers; however extra cautious we are and apply all metrics before choosing a Mutual Fund scheme, each ones portfolio will have few non performing schemes. Instead of sitting on it, you can consider exiting those schemes and invest in a scheme which has a good performance track record. Performance is not only about returns generated, at FundWallet we have a mix of Qualitative & Quantitative parameters to identify schemes.

4. Is your portfolio Diworsified? Have seen investors will huge list of schemes in their portfolio, due to this the portfolio will be highly tilted to small cap funds or large cap funds. This is the time to make things right.

5. Invest more; if you have investable surplus, consult your Advisor/Distributor and add to your portfolio. This opportunity comes once in a decade, so if you have long term horizon you can consider investing more, but have some plan for the same, don’t invest all at one go, wait for things to settle down and then take the plunge.

But remember, before taking any decision please take your tax incidence, Exit load of current schemes into consideration. If you have any other ideas, you are free to add.

Happy Investing!

RaVi