TIME TO MAKE THE RIGHT DECISIONS…TOGETHER!
FINANCIAL WELL-BEING IN COVID TIMES 1. DO NOT PANIC! KEEP A LONG-TERM VIEW OF IMPORTANT LIFE GOALS Do not let short term market fluctuations guide your decisions for long term goals. If your goal is a few years away then one bad year of stock market performance will not hamper your ability to achieve the goal. This is the best time to review/enlist your goals with your financial advisor and check if your portfolio is designed according to your life goals, your comfort with market fluctuations, and the current valuations of asset classes. In case you find it difficult to start investing for each and every life goal, priorities and start with the most important ones. The stock market valuations are attractive for long term investors. Historically it has been seen that investments made during the most bearish phases of the markets reap excellent rewards.
How can we help? FINVISE provides goal-based solutions. We can help review your current vs ideal asset allocation and help you re-balance your portfolio. An asset allocation-based portfolio based on your goals is best suited to tide through volatile times like these.
2. SHOULD YOU STOP YOUR SIPs? The current outflows can be broken down into the necessary need-based expenses for today (e.g., food, rent, education), the discretionary or want-bases expenses for today (e.g., gadgets, car, luxury items) and the money kept aside for future consumption (through investments meant for the long term such as SIPs in mutual funds). If you expect your income to reduce in the coming months you should first cut down on the want-based consumption. If there is a shortfall even after that only then you should look at cutting down on investments for your future goals. If your advisor has suggested a SIP plan for future goals it may be a bad idea to stop the SIPs in the current scenario unless it is putting a strain on the important current expenses or it will make it difficult to meet non-negotiable short-term goals. If your financial circumstances have not altered then it is best to continue your SIPs as you will be able to accumulate more units when markets are down, which brings down your average acquisition cost of units. Discuss the current asset allocation with your advisor. If your percentage equity portion allocation comes down in terms of present value this could in fact be an opportune time to increase allocation to equity.
3. ARE YOU ADEQUATELY INSURED? As we are faced with a disease-related crisis which has proved to be fatal in some cases, it is a must to review whether you are your family is adequately insured. The income earners should have a life insurance cover and the entire family should have sufficient health insurance. Your financial advisor can guide you with respect to the ideal sum insured. As a thumb rule, your life insurance amount should be at least 10-15 times your annual income if you are under 40. If you are above 40 it should be at least 10-12 times your annual income. If you are salaried and are part of a group health insurance from your employer then it is advisable to opt for a separate cover for you and your family. In case of job loss, you might lose the insurance coverage. Please ensure you take a high sum insured because most people assume, they will increase the amount later but often insurance companies are not willing to hike the cover once you get older. The Insurance Regulatory and Development Authority of India (IRDAI) on 4 March made it mandatory for all insurers to cover Covid-19 in the existing policies. However, you need to check your policy for coverage details like pre or post-hospitalization expenses, ambulance costs, quarantine expenses, tests, etc. We can help you select the best insurance plans for your needs.
4. BUILD AN EMERGENCY CORPUS
Salaried individuals should build an emergency corpus equal to 6 months of salary. Self-employed individuals who are staring at income uncertainty can go for a higher amount equivalent of 9 to 12 months of income.
We can help you pick the most liquid and safe investment options to park the emergency reserve.
5. YOU STILL NEED TO PAY TAXES – SO PLAN The government has extended most income tax-related compliance deadlines for individuals to June 30, 2020. This includes making tax-saving investments for FY 2019-20. Under Section 80C, you are entitled to a reduction in your taxable income of up to Rs. 1.5 lakh per annum. Equity-linked Saving Schemes (ELSS) are eligible under Section 80C. ELSS funds come with a 3-year lock-in period – which is the lowest among other investment options under Section 80C such as PPF and NSC which have a 15 year and 5/10 years lock-in periods respectively. ELSS if the only eligible instrument under 80C which gives equity exposure. For those who wish to take advantage of the low market valuations in the equity markets, this is a good time to look at staggered investments into ELSS funds through systematic transfer plans (STPs) or SIPs. We can help you identify promising ELSS funds.
6. DO YOU HAVE A WILL IN PLACE?
While you spend time indoors this is a great opportunity to put a will in place if you haven’t already. It requires collating details of all your assets and deciding which family members you wish to pass on these assets to. If you have a will in place, kindly review to see if there have been any significant changes that need to be incorporated. Without a Will in place, the assets get distributed as per the laws applicable. At FINVISE we make the process of Will creation extremely easy and professional.
7. SHOULD YOU AVAIL LOAN MORATORIUMS?
We recommend continuing to pay your EMIs on time to prevent the accrual of interest on outstanding dues. Missing two installments could extend your loan by 6-10 months or increase the EMI amount by about 1.5% (approximately). In the case of credit cards, the finance charges range from 23% to 49%. Only those whose income has been badly hit and who find it difficult to honor the EMIs should avail of this facility.
Example: A borrower took a home loan of Rs 50 lakh at 9% interest for a period of 20 years. The EMI comes to Rs 44,986. If he skips the EMI in April and May, the impact will be as follows:
So, the people who have taken a loan a couple of years ago will be more impacted compared to someone who took the loan 10-15 years ago.
STAY HEALTHY & SAFE! WHEN STEPPING OUT (a) Wear a clean mask
(b) Regularly and thoroughly clean your hands with an alcohol-based hand sanitizer or wash them with soap and water.
(c) Maintain at least 1.5 meters (6 feet) distance between yourself and others
(d) Avoid going to crowded places
(e) Avoid touching eyes, nose and mouth
(f) Make sure you, and the people around you, follow good respiratory hygiene. This means covering your mouth and nose with your bent elbow or tissue when you cough or sneeze. Then dispose of the used tissue immediately and wash your hands.
(g) Avoid handshake – Indian Namaste works best! HOLISTIC WELLNESS (a) Maintain hygiene – it is important to wash hands at regular intervals and wash towels frequently
(b) When you receive home deliveries clean the boxes or keep them in the sun for some hours. The virus is said to live on plastic and stainless-steel surface for 72 hours, cardboard for 24 hours and copper for 4 hours
(c) In case you have any symptoms such as dry cough, fever, running nose, breathing difficulty seek immediate medical attention
(d) Avoid stress as stress and anxiety weakens the immune system
(e) Be active – practicing Yoga or physical exercises always helps
(f) Get enough rest – adequate sleep helps recharges immunity
(g) Practice love and gratitude – our positive thoughts make us strong internally
ON A LIGHTER NOTE: QUARANTINE TALES
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ARE YOU READY? WE CAN ADVISE YOU REGARDING THESE… Financial Planning Solution is the road map for your financial life. It covers major financial areas of your life addressing aspects such as cash flow, savings, debt management, risk management, children's education planning, taxes, retirement, estate planning, and of course, investments and a strategy for managing them. Investment Solutions for planning your long term & short-term financial goals - Mutual Funds - Equity (including ELSS) - Debt - Hybrid - Portfolio Management Services (PMS) - Fixed Deposits - Bonds Insurance Solutions to protect you and your loved ones - Life - Health - General Loan solutions to manage liabilities better Succession Planning for planning succession in the best interests of your loved ones For More Details Contact Us:
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