How and Where to Invest during an Economic Crisis

The festive season might be around the corner but unlike every year, this year is expected to be particularly gloomy. The Coronavirus pandemic and the consequent lockdown has not only put a damper on everyone’s plans, it has had a huge impact on markets and economies, not just in India, but around the world.

Economic Crisis

Businesses have suffered tremendous losses due to a shortage in resources. From capital and raw materials to manpower and revenues, this year has been short of every aspect that helps build economies. While Governments across the world have been introducing relief packages in terms of tax waivers, extended deadlines, public sector investments in order for businesses and corporations to stay afloat, these packages will bring relief only for a limited period. Now that the second wave of the Coronavirus is making its way around the globe, things are expected to look pretty grim. Economies are expected to do far worse than the global crisis of FY2008-09. But every dark cloud has a silver lining. Economies have faced a global crisis before and have successfully managed to rectify the situation. There is a lot to learn from economic crises in the past. So if you are looking to invest during such a time, there is no reason not to. Yes, the investment market is complicated, and the coronavirus pandemic is adding fuel to the fire. But that doesn’t mean that we should shy away from investments. Even though times are difficult, investment opportunities during such a time are available in plenty. Here are some ways to invest your money during the Covid-19 pandemic.

Insurance

For most young professionals, the word ‘investment’ almost always means stocks, securities, mutual funds etc. But in the time of a crisis, one of the most important investments should be an adequate insurance cover.

Times are uncertain and any unforeseen circumstances can lead to large expenses. Thousands of people are contracting the Coronavirus everyday and hospitalisation expenses are touching the sky. In such a time, being admitted to a hospital for even as little as a few days can cost you a substantial amount of savings. It is best to invest in a comprehensive and robust health insurance plan so that the expenses of hospitalisation does not eat into your savings. Additionally, it is important to protect your loved ones with a substantial life insurance plan. If you already have a life or health insurance plan, it wouldn’t hurt to beef up the plans with add on coverage. Keeping the pandemic in mind, several insurance companies have rolled out comprehensive treatment coverage plans called the CoronaKavach. It will be useful to invest in a plan that can protect you from expensive health care costs.

Emergency funds 

Any financial advisor worth their credit will tell you that it is good to have at least six months worth of savings stashed away for a rainy day. As young professionals in their twenties are starting to realise the importance of having savings during the pandemic when they are facing sudden pay cuts and job insecurity, they need to do more than just let their money sit in a savings account. Yes, a savings account can give you anywhere between 4% to 7% of interest, but that is barely anything when compared to potential expenses in case of an emergency. Now will be a good time to invest some savings in a liquid mutual fund. This will ensure you have a cushion to fall back on in case of job loss or an emergency.

Stocks and securities 

In a time when stocks of companies are plummeting because of revenue loss, investors tend to move away from such companies. But it actually might be a good time to invest in companies with lower share prices. But that’s not the only reason to invest. Investing in stocks and securities is tricky, especially if you are a young professional and don’t have much experience in investing. A financial advisor can help you create a robust portfolio that will be based on your financial goals and risk appetite. Depending on your preferences, a financial advisor can help you invest in equities, debts, liquid and balanced securities. It is also important to take stock of opportunities in emerging markets especially in those of pharmaceuticals and medical research as more and more high net worth individuals and investment banking firms will direct funds toward businesses looking to develop a solution for the novel Coronavirus.

Real estate

Not everyone wants to invest in stocks and securities. Some young professionals would prefer investing in property and experts suggest now would be a good time to invest in real estate as there has been a considerable drop in real estate prices. Additionally, home loan interest rates are said to be at a record low, having come down to almost 7% – a very rare phenomenon. So if a new home is one of your financial goals as a young professional and you have a secure job, you could avail of a home loan at a reasonable rate of interest.

Even more important than pouring in more funds into investments is to remember your current investments. In an uncertain and volatile financial market, it is easy to panic and expect the worst. But even if you are new to investments, the first rule of investing is to not panic over market volatility. Additionally, don’t make spur of the moment, impulsive decisions and withdraw from funds. Do not discontinue your current investments because of a reduction in pay. It might be better to cut down on costs then to cut down investments. Your monthly SIPs and recurring deposits will allow you to remain disciplined while investing. Finally, keep a calm head, talk to a financial advisor in case you have doubts and keep an open mind while investing.

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