• Emergency Funds : This financial crisis is different from other crises. No One knows, how long it may continue? We have to accept this fact that, investment is not a priority. Family expenses and health expenses are more important in the current scenario. Keep 6-9 month Family expense funds ideal in liquid funds or short term FDs (Not beyond 30 days). Apart from this, keep 3 months' family expense funds as health exigency funds separately in short term funds wherein there is no lock-in but better ROI than Liquid funds. One has to create, one full year income as a separate fund for an emergency fund in the current situation.

• Risk & Reward : Market is down and most of the funds and stocks are looking very cheap, so does that mean, buy anything on any price “NO “. Every individual has a different risk appetite and also has different ROI expectations. NO two individuals can be the same. Availability of funds, the income also decides risk appetite in the current scenario. How much risk one can take, where to put a stop loss, where to book profits, how long the fund has to be carried, all these questions can be answered & needs to be assessed before investing.

• Time horizon : Each individual will be having a different idea for the investment period. One may invest for 2-3 year and one may be planning for retirement corpus. Idea and purpose have to pre-define with time horizon for investment. Short term investment in the current scenario may be a disaster.

• Product : In equity also different vehicles of investments are available. There is an option of Direct Equity, PMSs, Equity Funds, and Index funds. Your risk appetite, ROI expectation with Time horizon clarity will help you in finding a suitable product. In the current scenario, casual buying may lead to erosion in capital or bad ROI generation.

• Understand the component of Product : After choosing the product, you have to choose the product provider from the market. Now here is a tricky thing, before selecting any product provider, analyze the product structure and its component. Try to recheck the capability of the solution provider from the record. Yes, do agree that past performance is not a guarantee or assurance of future performance but it helps in understanding the mindset and capability of the fund manager, In the current scenario, if you can choose a better carrier, then it may help you in getting better ROI without taking much risk or facing volatility.

• Buy businesses, don’t buy past performances : X stock was trading at Rs2000 in Jan, and now it’s trading at Rs 350, doesn’t make sense for buying. Accept the fact, every stock has own intrinsic value and if the market is corrected for 40% and the stock has fallen for more than 70% than there is some issue with the business model. It may be or may not be having a decent business model. Here, we are not saying that 100% it’s a wrong business model but each decent business model will find buyers on some levels but if scrip is not able to find that buyer than keep yourself away from that. There is the availability of a lot many types of scrip in the equity universe. Do not unnecessary venture into those scrips which are struggling in troubled water. Buy those stocks which are sound in the business model and has the capability of sailing through troubled water and has good cash flows from operations. Companies wherein promoters stack is pledged beyond a comfortable limit or companies which have lots of debt burden on the books, avoid them. Give preferences to large-cap stocks, compare to Mid Cap or Small Cap stock as these stocks will feel the heat of Lockdown.

• Step up Investment planning : Don’t go for single-shot buying in the market. Be it Funds or Direct equity; try to go in a scattered manner. Nothing is changing in one day. Averaging in the current market is the best scenario to avoid the risk of market timing. You can’t time the market and in this way, you will be in-market without much capital risk. STP and SIP are the best tools for fund investment in the current scenario. If you have a decent amount available after your emergency funds allocation and you want to go for Mutual fund then better to go for STP, compare to Lump Sum investment. Daily STP can be a key, which major of fund houses provides as the facility. Spread Lump sum investment in the next 2-3 months or at least 30-40 installments for better rupee cost averaging in lump sum investment. SIPs you may continue as it is because they are long term products with the time horizon of 10-15 years.

Markets are looking good at valuations but we believe because of this invisible enemy “COVID-19”, markets can remain uncertain for the next 4-6 months. It may be a good time to invest with the horizon of 4-5 years on the minimum side. Systematic planning, the right mix of product, right product provider, decent asset allocation with decent time horizon can deliver dream returns for the next 4-5 years wherein risk & reward ratio will be favorable towards the investor.
Happy Investing!

Disclaimer:  All views expressed in articles are of Mr. Rohit Khandelwal. He is AMFI & IRDA registered advisor. The author doesn’t hold any responsibility towards any accuracy of data or statistics. For any investment advice, kindly call your registered financial advisor & before investment, kindly read the offer document carefully. Moneymatters and its employees don’t guarantee for any assured returns.