Eat healthy, stay safe, cut down unnecessary expenses, calmly make contingency plans and seek expert advice when feeling in the dumps
The pandemic has precipitated unprecedented disruption in both global and Indian financial markets. Rising cases of unemployment and slowdown in economic growth have left people wary and confused about their savings and investments. In such times of uncertainty, it is important to prepare oneself and take stock of their savings and finances.
The Covid-19 pandemic has had a significant impact on how we look at money, and has forced us to reassess our financial goals. More traditional avenues of investments such as mutual funds (MF), fixed deposits (FDs), equity shares and returns generated from it have witnessed a steep decline following job losses and small businesses facing a struggle for survival. From fresh job seekers not landing employment opportunities to retired senior citizens seeing their savings dry up, barely anyone is unaffected by the pandemic.
During times of scarcity and panic, we generally witness ‘herd effect’, where even rational and independent thinkers fail to think logically and blindly follow trends. An example of this is, when at the onset of the pandemic, Indian markets saw a significant surge in the opening of millions of new demat accounts, especially by youngsters and millennials. They viewed this as an opportunity to supplement their income and take advantage of falling markets.
However, I would recommend against jumping into the equity bandwagon with no prior knowledge or experience. They may have made some temporary gains in the short run, but as the pandemic progressed, markets have turned volatile. With volatility becoming the new normal for the equity market, new investors facing turbulence may have ended up with sacrificing not only whatever little profit they had made, but may also have suffered loss of capital, putting them under tremendous financial and mental pressure, creating even more panic and disappointment among them.
Managing Mental Health
When volatility becomes the new normal across various investment products, investors need to navigate cautiously. What should they do? How can they emerge safely out of the hyper-volatile street? One has to personalise their portfolio by assessing current and future needs, which may differ from person to person, as every individual has different preferences, goals and choices. It is important not to get carried away by the ‘herd effect’ but to focus on individual goals.
Avoid Unnecessary Expenditure
Minimise funds allocated towards short-term and high-risk gains, and choose long term and safe options. Set up a fund which can be easily accessed, should one lose his/her job.
Lead a Healthy Lifestyle
Leading a healthy lifestyle is most important for active financial life. You should go to sleep on time, have adequate slee, eat healthy meals at regular intervals, supplemented by exercise, and you should avoid alcohol, smoking or anything that may interfere with effective decision making, at least till the uncertainty disappears.
Be Prepared for the Worst
Whether a third wave of the pandemic happens or not, it is essential that we plan ahead and allocate our resources in planning for the same. Investment experts are of the view that sooner someone accepts that a third wave is going to hit us, they stand a better chance to make preparations. If one is fortunate to have a steady income flow, they can focus on setting a fraction of those funds aside for emergencies such as hospitalisation, then continue with their regular investments like systematic investment plan (SIP), recurring deposits and postal savings.
The author is a Mumbai-based psychologist, specialising in Clinical Psychology