How to manage portfolios during crises?

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How to manage portfolios during crises? The recent coronavirus crisis has hit the financial markets hard. Stock exchanges all around the world are seeing red and have entered a bearish phase for the last two months.

Investors who invested in equity stocks and mutual funds have been experiencing a loss in the value of their investments and the possibility of a recession looms large on every country’s head. Amidst these crises, it is necessary to change your investment strategy to minimize your losses. Here are, therefore, some investment tips and tricks for you to manage your investments – 

Investment tips and tricks in coronavirus crisis

  • Do not panic. Though the financial markets are currently falling, they would stabilize once the pandemic comes under control. If you are a long term investor, remain invested. Your investments would give good returns when the market stabilizes and then corrects itself in the long run.
  • If your portfolio is heavily invested in equities, switch to a debt-oriented investment strategy to protect your returns. You can switch to debt or liquid mutual funds when the markets are falling.
  • Try and book your profits before the value depreciation results in a loss. Redeem your equity funds when they are still offering positive returns to minimize your risks.
  • A falling market is, in reality, a very good market to invest in. So, if you have been meaning to invest in equity, it is a good time to invest. You would be able to buy at a lower value and later on, when the market corrects itself, you can earn good returns on your investments.
  • Do not forget to plan your taxes when investing or redeeming. When investing, look for tax-efficient investment avenues so that your tax liability is reduced. Similarly, at the time of redemption, check the tax implication of the returns that you have earned.
  • If you have an ongoing SIP (Systematic Investment Plan) in any mutual fund scheme, do not stop it. SIPs, through regular periodic investments, average out the NAV at which the units are bought. It, therefore, gives you the benefit of rupee-cost averaging along with disciplined savings. Thus, any market volatility should not cause you to stop SIPs. Mutual fund investments are long term investments and if you remain invested for a longer duration you would undoubtedly earn good returns. So, continue your SIPs and see positive returns once the market becomes bullish.
  • See Also: Emergency-funds-during-coronavirus-pandemic
  • If you are investing in fixed-income securities like fixed deposits, Public Provident Funds, Sukanya Samriddhi Yojana, etc. do consider the interest rates and tax implications of such investments. The interest rates on many fixed-income investments have been reduced by the Government from 1st April 2020 given the slowdown of the economy. So, consider the reduced interest rates and then invest.

The coronavirus pandemic is wreaking havoc world over but once it blows over, things would normalize. Meanwhile, you should be careful about your investment strategy so that you can brave the challenges which the coronavirus crisis has thrown to the world.  How to manage portfolios during crises? Comment your views. 🙂

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