Saturday, May 30th, 2020

Financial Tips during these Uncertain Times

- Satyam Kumar -


There is an economic slowdown due to the outbreak of the pandemic of Covid-19. This event has compelled everyone to raise questions regarding their investments and stocks in the market. Experts predict a further downtrend in the economic conditions globally. Stocks are available at lower prices, thus, tempting consumers to invest right away so as to reap the benefits when market picks up pace. But is this the right thing to do? And,how to function in such sensitive scenarios? – Questions that everyone right now, needs answers to!

As the social media may be congested with various news, rumours or memes with regards to the current situation, it is wise enough not to be a blind believer and instead be a smart decision maker. The scenario calls for adopting caution and thus, here are few tips chalked out, to help you keep your money relatively safe -

1.       Avoid Travel and other Discretionary expenses –

You must avoid spending on leisure, travel or any other such expense which isn’t the need of the hour. Keep funds for daily household and medical expenses. The focus must be only on necessities for a few months.

2.       Investing in long-term investments –

It is advised to avoid investing currently, but if you are tempted to invest and make the most of the market condition, you must invest in long-term instruments. These instruments are often low on returns; however, they can prove to be the safest bet when the market is going through such a volatile phase. Choosing to invest in Government schemes like National Pension System (NPS) or Public Provident Fund (PPF) can prove to be more secure source of investment.

3.       Adopt the Multiple Basket Strategy -

Most of us are also apprehensive about our money that is lying in banks.We can never rule out any technical failure or a situation where regulatory norms are being imposed. If you are dreading a freeze on your banking/financial institution, here’s what you can consider –

i.                     Similar to the strategies we use while considering investments, we must apply the same while we are opting for asset management and managing our labilities, i.e. take account of the long term and ensure the risk is spread out.

ii.                   As a part of being forearmed, we must keep our money in 2-3 different Institutions/Banks to avoid the scope of high loss during a period of crisis.

How to choose the Right Financial Institution or Bank?

Certain parameters must influence the choice of Institution, while you are on the look out to protect your money. Your decision must rely on - first, the size of the Institution. Large and long in the tooth companies have lower risks of impact in uncertain times. Also, to save such Institutions in times of uncertainty, there is a higher chance of regulatory boards stepping in to minimise damage.  Secondly, you must be aware about the stability of the institution. Educate yourself about aspects like the Non-Performing Assets (NPA) of the institution or Capital Adequacy Ratio (CAR) to gauge delineation, stability and roots of the particular firm.

The situation doesn’t need trepidation, all one requires to do is take the necessary precautions to be secure and armoured so as to reduce the adverse effects and sail through it all, smoothly!

 

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About the Author
Satyam Kumar
Columnist and Author
 
Satyam Kumar, CEO, LoanTap, a banking Veteran with over 16_years of experience in the Banking Industry.
 
 
Disclaimer : The views expressed by the author in this feature are entirely his own and do not necessarily reflect the views of INVC NEWS.


 

 

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