According to Kubler Ross Model, we are in the fifth stage – ACCEPTANCE , which is acceptance of medical crisis and uncertainty around us ,from today Unlock 1.0 phase starts ,economy and markets will start recovering slowly in a phased manner with knee jerk reactions as and when we see covid19 escalations.
Our portfolios will look better due to last week’s rally in the markets which are expected to prolong this week too on good buying from foreign institutional investors along with domestic money managers.
As stated in my May month’s email, the real test is due in July/August 2020, actual numbers of Q1 (Apr-Jun qtr.) would be known, which will decide the further course of action by policy makers, RBI and markets.
Still then and for next six months we can focus on things under our control which are
- Maintain emergency funds for next six months expenses (household + education + EMI payments) – do not opt for moratorium on EMI’s unless and until necessary, payments towards credit card dues needs to be made first , then personal loans , then other loans.
- Review life insurance and medical insurance cover – these are contingency planning tools which always must be adequate – we can help you assess the quantum of insurance cover required for your families.
- Continue your investments through SIPs /STPs , this is not the time to stop unless if you need for the above contingency tools – our rational is if you were accumulating investments at 42K Sensex then why should you stop at 32K Sensex if all the other factors remains same, Today the NAVs/prices of large cap funds are available at 2017 levels, midcap fund at 2015 levels , small cap funds at 2013 levels
We suggest you use this opportunity to keep accumulating more units through your systematic investments, so and when markets recover our portfolios will reflect returns as anticipated.
Given that interest rates in conventional fixed deposits have dropped to 6% levels and with no taxation relief, debt mutual funds offer the benefit of indexation or inflation adjusted investments, so that your taxes comes down if you hold it for more than three years. Categories like short term, corporate bond and banking & PSU schemes with good quality portfolios are our recommended investments in the current scenario. Invest through lumpsum route in these funds to generate better tax adjusted returns with low risk.
Happy and Safe Unlock 1.0!!