3 Money Mistakes you should Avoid during Covid-19 Lockdown


This year saw a big drop in the equity market: a 25% drop already. This has led many to start worrying about their investments. This however leads to hasty, and in many cases, wrong decisions. One of the best things you can do right now is nothing. That means try not to do anything, such as taking hasty decisions. Of course, you may have to adjust in some areas of your financial life, but going overboard while doing so is not right either. Below given are some mistakes to avoid during this time.
Selling off your equities

People tend to sell off equities when the market crashes, or when there is a recession. Perhaps you may just wish to shift to bond funds instead, which are safer. It’ll be interesting to know that just last month the multi-cap funds category fell by 27% on average. This certainly means people are now rushing for safer investment options. Now that people have more time on their hands, they are watching their portfolios closely. This is not always a good thing. When they incur losses, they overreact and sell off their equity funds. This may not be productive to one’s financial well-being.
Selling stocks can cost you dearly. When you switch from equities to bonds, you are only showing your notional losses. Since interest rates of FDs are falling, it will take you a long time to recover the money you lose in equities. While there is panic all around for sure, it is not useful to panic yourself when it comes to your finances. It pays to keep a cool head. Try not to sell your stocks or to stop your Systematic Investment Plans in equity funds.
Going overboard with stocks

When it comes to stocks, especially right now, many investors are going overboard with buying. After the recent downsides in the stock market, many investors want in while the prices are low. But there’s a problem with such transactions: they are led by the fear of missing out primarily. It should instead be done in a measured way. What effect thepandemic has or will have on our economy cannot yet be ascertained.

Stock valuations are undoubtedly attractive right now, but investing all your money in small cap equity mutual funds should be avoided. When you are determining the number of stocks to invest it, also look at your risk-taking strength. See whether you have emergency funds as well, in places like bank FDs. These emergency funds should be sufficient for a year.

Opting for loan moratorium

When the RBI encouraged banks to give its customers a 3-month loan moratorium, a lot of people hailed it as good news. It certainly came as a relief to those struggling to pay EMIs due to job loss and cash crunch.

However, if you do have the cash to pay EMIs right now, do not take the moratorium. Opting for the moratorium comes with extra costs. Besides, if you do wish to continue repaying, cut down on unnecessary expenses. Use surplus funds that you got from your businesses or a salary bonus. If there are any non-performing investments in your portfolio, use those as well.

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