One positive thing that the Coronavirus pandemic and the subsequent lockdown have taught us is to spend on what we ‘need’, not what we ‘want’. Many people have reportedly spent less money during the lockdown phase since they couldn’t venture out and get their hands on unnecessary stuff.
And now that we have corrected our spending habits, let’s review our personal savings and investments so that we can sail through the year. A few financial experts tell us what should be our priority when it comes to savings and investments.
Ankur Choudhary, co-founder and chief investment officer at Goalwise.com, says that Indians, in particular, have always followed the basic rules of finance management and accordingly saved and invested our money. However, when it comes to the recent steep economic slope, people are worried about the investments they wanted to make or have already made.
“We have seen a lot of market crashes and ups and downs. What makes this situation different is the fact that it is affecting the health of people everywhere, which has brought a lot of focus on how people save and spend,” says Choudhary.
He points out that it is too early to come up with an estimate of how much time will be needed to recover. However, now is the time for people to review their financial habits.
Choudhary says that right now, people are facing two main problems -- job security and cash crunch. However, most Indians have a safety cushion -- their savings, but it is crucial to keep in mind that this money is an emergency fund and it cannot be used to make investments in long term plans. A part of these savings can be converted into liquid mutual funds or fixed deposits which are safer options, he feels.
He further adds that the pandemic has impacted both income and expenditure structure which has helped us to analyse how we would be spending money, even post the lockdown.
“The millennials here are a special case. We have seen that they have always lived in the moment and have believed in their spending power. The pandemic will change their view and already has. They have now realised the benefit and importance of long term savings,” he observes.
To save or to invest
The financial markets are a tricky space, so uncertainty is a common factor here. However, what is important now is to first focus on building a smart and strong security cash pillow that can last for at least four to six months. Keeping that in mind, Vivek Bajaj, co-founder of StockEdge, points out that Indians, in general, are not high on expenditures. They do it systematically. However, they will now review and evaluate all their gross expenditure to eliminate what is needed and what is not, which in a way will lead to savings.
He adds that people have always trusted mutual funds since they are open-ended. Even though the returns on them are not that great, people consider the fact that they are safe, and it is easy when one has to withdraw all of the amount put in it.
Both the experts believe that now is the time to buck up on the savings and then plan out an investment plan.
Choudhary also adds that people usually invest with the idea of saving up on taxes. “However, let the market recover, and then one can return to investments as the financial year is long ahead. As of now, do not lock in long term products,” he says adding that even though the financial market seems to be grim at the moment, it is important to keep calm because markets will see a recovery.
Smart and safe investments
Bajaj says that the slowdown has impacted a lot of industries; however, it is important to focus on the recovery part now. “When it comes to making investments or growing your financial planning, the first thing to focus on is how much savings do you actually have and understanding how much do you want to invest potentially. The market right now is such that it could be a risky affair, but the safest option now is to invest in government bonds and schemes,” he says.
The founder also points out that people have regularly invested in private sectors, but the awareness when it comes to government is quite low.
“This is a good time to invest in good health/ medical insurance and keep money aside for wellbeing and health purposes,” says Choudhary and adds that people need to understand the difference between term insurances and regular insurances and only those people who have dependents on them should invest in them.
A helping hand
Selecting the right type of scheme can be not only tough but also confusing especially if you are a new and young investor. However, it is crucial to seek help from experts since market investments do have a certain amount of risk.
It is important to understand not just the various finance and market terminology but also study the growth rate, dividend rate, and so on while selecting a SIP or mutual fun plan.
To understand your investment profile and what type of investment plan can suit your cash appetite both in the short and long term, long on to www.sakalmoney.com today.