Pressure on the world economy is mounting, and investors are not getting the desired results or returns on their investment. Financial products neither performing well nor meeting the expectation. Thus, it’s very common for people to feel uncertain in the current financial market. Despite economic slowdown is cyclic and it makes sense to relax your finances and tides up the associated goals with your investment portfolio, in this kind of an unstable market, else it could be a costly mistake. Have a look at the following smart ways to handle or plan for such challenging times.
Investing in a highly volatile market could be risky. For example, a lump sum amount of a 1.5 lakh is invested by you in any mutual fund whose net asset value is Rs. 100, and by any chance if the market falls, then your invested corpus amount will get negatively impacted. And if you have taken any personal loan to invest, then it will badly hit your finances further. So to make investments in unsure market conditions, it’s better to fragment the corpus amount and invest in small investments. For example, you can make a liquid fund of 1.5 lakh and opt for SWP i.e. systematic withdrawal plan by investing Rs. 10,000 every month over 12 months. This way you can smartly get the advantage of rupee cost averaging, hence minimizing the impact of market volatility on your investment.
Hybrid funds are said to be a better option when investor protection needs to be made in prevailing market conditions. This suits the needs of those investors who can’t face the ups & downs of the market as these funds limit the volatility risk associated with returns in a structured way. You’ll find different flavors of hybrid funds such as balanced advantage funds or Dynamic asset allocation that are invested across equity and debt, depending upon the prevailing valuations and varying exposure of risk of either segment from 0 to 100%. Hence, these funds manage volatility by moving towards both ends of the asset spectrum. Few factors of arbitrage through equity derivatives are also present in balanced advantage funds.
On the other hand, multi-asset funds are invested, subject to a minimum for an individual segment, across gold, debt, and equity in different proportions. This way, under one umbrella, you achieve a higher degree of asset diversification. Equity savings funds are also a hybrid, where at least 65% of the portfolio comprises the mix of equity and share derivatives. And fixed-income avenues are used to invest the rest percentage. The direct equity exposure is lower, consequently, funds remain less volatile.
Applying for these funds is as easy as you go for any online loan app.
One of the biggest mistakes made by any equity investor in the economic downturn is discontinuing the SIPs. They forget that they have when prices are low it makes a better opportunity for the investor to accumulate more. No doubt investors’ concerns are valid, but historical data, taken from mutual fund tracker, show that SIPs perform well in the long-term.
Financial challenges or crunches are not always dependent on market condition, some are unforeseen too, i.e. hospitalization, accident, etc. The solution to this problem is to remain financially protected through an appropriate insurance policy or cover. For example, take life insurance plus term insurance cover to financially protect your family, in case of your demise, go for comprehensive health insurance for yourself and your family with an adequate amount. All these insurance plans help or ensures you and your family can face severe challenges.
To reduce risk, it’s better to invest in different products and diversify the investment portfolio like in gold, SIP, mutual funds, etc. In recent months we have seen a sharp rise in gold prices and when there is uncertainty in the market investors’ flock towards this safe gold option. As per industry experts, it’s always advisable to keep at least 15-20% of investments in gold. Today you can also buy gold online under the systematic plan through investing a small amount, in the same manner as you apply for online loans.
When the market conditions are not good and there are risks & uncertainty involved, it’s better to control your expenses and debts. For example, you might take the personal loan as you surely fulfil loan criteria’s but when the market gets worse than it might be stressful and challenging for you to repay the loan amount and clear your debt. This will result in a negative credit score due to non-payment.
The Indian real estate industry is not performing well from the last few years. Although, housing financing firms and builders are still offering big discounts and low-interest rates on home loans as a lure to buyers. In a current economic slowdown, the real estate market conditions will prevail as a threat and unlikely to improve. Already builders are stuck up with old projects and need to clear those old inventories. Thus, there is no point in investing money in the property until or unless it is ready to move-in.