How to manage wealth effectively during the COVID-19 crisis – The Financial Express

A black swan event, COVID-19, has shaken the entire world as no one was prepared for this pandemic. The shutdown of economies all across the globe has created financial uncertainty. The increased rate of unemployment paired with market fluctuations has left people perplexed. Recession is something that looks inevitable. People dont know how to react and what plan they should adopt to protect their familys future.

The pandemic has left the investors worried not only in India but all around the world. With markets being volatile, many of the financial instruments are generating negative returns. What adds to the worry is the uncertainty about how long this pandemic is going to last. The entire situation is going to have a negative impact on the wealth of investors. Therefore, having a robust strategy to manage ones wealth not only with the objective to secure the capital, but also to generate desired returns is the need of the hour.

Being an individual investor, you can follow these four smart tips to manage your wealth effectively, not only during the COVID-19 crisis but beyond.

Considering the current scenario, wealth creation seems to be a difficult objective to achieve. The sudden outbreak of COVID-19 has eroded the investments of numerous investors. In such a case, the first step that needs to be taken to manage your wealth is to evaluate, redefine and reassess your risk appetite, the style you adopt for making investments, and your level of comfort. A proper asset allocation mix of multiple asset classes that are not co-related is essential to diversify the risk. The other key requirement for appropriate management of your wealth is to invest for a long period. Doing so ensures that COVID-19 or any other crisis does not impact your portfolio.

The equity markets in the current times are experiencing high volatility. This high volatility can result in equity investments generating negative returns. In such a case, it is advisable to buy dips and staggered investments for more than 6 months. Taking such measures will help investors build equity exposure in the portfolio of the investors for an investment horizon of more than 3 years.

As we know that the equity markets remain volatile in the current pandemic situation, having a fair share of fixed income investment instruments can be a profitable step towards wealth management. Even though interest rates are seen declining during the current times, there are a few opportunities like 7.75% interest paid on Government of India Savings Bonds with a lock-in period of 7 years that can help generate stable returns. Other fixed-income investments that can be explored include Banking and PSU Debt Funds, short-term debt funds, and Bank FDs that can help in optimizing portfolio returns.

Gold has been a preferred investment avenue for years. In the current situation, when the economy is heading towards recession, investors and individuals are hesitant about investing in gold. People are looking for suitable investment avenues that can be easily liquidated during the downturn. This is where the yellow metal comes to play. Gold has always been a safe investment asset with no counter-party risk and is expected to retain its value even in times of recession. In light of low global economic activity and a low rate of interest across the globe, gold is an asset class that is expected to perform well. You can consider buying Sovereign Gold Bonds that generate an interest income of 2.5% annually with gold prices-linked upside.

It is always advisable to invest in international investment avenues when diversifying your portfolio. Investing in international equity helps in diversifying country risk, credit risk, and currency risk. It also opens opportunities to invest in companies dealing in technology, healthcare, and other sectors that are not available for investments in India. For instance, you can prefer adding US equities and technology-oriented funds in your portfolio to generate higher returns with diversified risk.

In order to manage your wealth profitably and effectively during times like COVID-19, the first and foremost thing you need to keep in mind is to reassess your financial goals and objectives of investing. Before putting your hard-earned money in any asset class, it is always advisable to reassess your risk-taking capacity. The other golden rule of investing and managing your wealth portfolio is not to put all your eggs in one basket.

(By Yogesh Kalwani, Head Investment and Family Office, InCred Wealth)

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How to manage wealth effectively during the COVID-19 crisis - The Financial Express