I have received many questions over email and comments on what to do during this market fall. They have SUDDEN additional funds and looking at my guidance.
I am surprising daily with such messages. The reason is that why suddenly investors started to get ADDITIONAL surplus than their usual life and usual income (including usual expenses also).
My answers to such questions are as below.
I always used to say to my clients “You predict many things, you did the BEST FINANCIAL PLANNING. But if a day comes in your life where today’s survival is in question than the FUTURE, then the LIQUIDITY and EMERGENCY FUNDS are your OXYGEN”.
# Your LIFE and HEALTH are at RISK
Yes, with the speed Coronavirus spreading across the globe, it is hard to predict ourselves that we are SAFE. Hence, concentrate on your health and fitness. Take care of your family.
Do remember that Coronavirus spreading like SPEED, not like VELOCITY. Hence, taking care of yourself is the utmost importance and then comes the money matters.
# Your PROFESSION is at RISK
The kind of impact it is showing on the whole economy and across the world, never think that your profession or job is SAFE. If you think so, then you are the biggest fool.
To a certain extent, your employer may cushion you and pay you regular salary. If things go beyond their control, they may also through away their hands.
# Your FINANCIAL GOALS are at RISK
If you are ALIVE, then there is a value for your RETIREMENT GOAL. If you are not alive, then what is the use of your retirement goal? But I am not saying the same towards your dependents goals.
However, with the current changing scenario, you have to understand the severity in prioritizing your financial goals than living in a dream.
Considering the above such risk, if you are ignoring the LIQUIDITY and EMERGENCY FUND, then you are one of the biggest FOOL.
# Never stick to the standard rule of EMERGENCY FUND
Many planners (including me) used to suggest you to keep around 6 months to 24 months of your monthly expenses (inclusive of EMIs) as an emergency fund.
But the way this epidemic taking shape, I think one needs to build emergency funds beyond this 6-24 month rule. Because we don’t know how much time the economy takes to revive. Hence, build your emergency fund as much as you can.
# The regular show of investment should continue
If you are investing monthly through SIP and did proper asset allocation, then continue your investment as usual. At the same time, continue your lump sum investment strategy also by staggering the equity entry into for around 6 months to a year.
Never jump and increase your lump sum deployment into equity just because the market fell. NONE on this EARTH aware of the depth of the fall. Stop following if someone who is PREDICTING.
START BUILDING YOUR EMERGENCY FUND AGGRESSIVELY THAN FOOLISHLY WITHDRAWING FROM IT AND ENTERING INTO EQUITY JUST BECAUSE MARKET IS DOWN.