Five financial mistakes that you can avoid:
There is no denying the fact that we are going through testing times. In these circumstances, it is easy to make mistakes. Your investment portfolio and other money-related areas of your life are likely to be impacted. We understand that it is not easy to keep cool when the value of your assets is tumbling. In this article, we have jotted five financial mistakes that you should avoid during this period as the entire world fights against coronavirus.
The coronavirus pandemic has resulted in business slowdowns and many people are likely to lose their jobs in the coming months. Hence, it is important to make a bare minimum budget based on essentials such as rent, utility bills, EMIs and follow it religiously.
Following a strict budget, will help you to save more money and have a larger corpus in your emergency fund.
An emergency fund is utmost important for all individuals as it can help them to tide through emergency situations such as job loss or health emergency. Under normal circumstances, an emergency fund should have at least three to six months of expenses. However, the current scenario is different and you can look forward to building an emergency fund that covers one-year expenses.
Build a bigger emergency fund by letting go of unnecessary spending and focussing only on the bare minimum. You can look at your bank statements and find out any recurring costs that you rarely use.
Liquid funds and savings accounts are good options to park your emergency fund.
Systematic Investment Plan (SIP) is a systematic way to invest in mutual funds. It is seen that most people start investing in mutual funds when the market is high. One of the important features of SIP is rupee cost averaging that tends to average out the cost of buying mutual fund units. You are allotted more mutual fund units when the market is down and lesser units when the market is up.
When the market is going through a downturn, many investors make the blunder of stopping their SIP investments or withdrawing their investments. If your long term goals have not changed, there is no need to stop your goal-based SIP. Volatility is a part and parcel of equity investments. Focus on your goals and don’t make the mistake of stopping your SIP investment.
For some individuals, it may be the right time to increase your investments. This leads us to the fourth mistake.
With the risk-averse mode on, many investors avoid making new investments in the equity markets and rush for safe-haven assets such as gold. On the other hand, it may also be the right time to make new investments and increase your SIP instalments.
You may be able to select good quality stocks at a bargain. It is best to look for good investment options than totally avoiding new investments.
During volatile scenarios, equity investments in your portfolio will undergo tremendous fluctuation on a daily basis. If you keep checking your portfolio daily or several times a day, you will be tempted to take some action which may not be good for you in the long run.
Hence, refrain from checking your portfolio frequently.
As most of us are undergoing stressful scenarios, we are prone to make mistakes. These mistakes can have a serious long-lasting impact on our financial life. Here we have mentioned five common investment mistakes that you can make in this time. Consult a financial advisor or expert to gain clarity before any investment decisions.
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