A crisis like COVID-19 calls for sound portfolio management. Building a crisis-proof portfolio requires patience and understanding. Each investment decision made has a consequence. Sometimes the consequences can be adverse, so here are a few tips to help secure your portfolio from a crisis-

 

Be Sensible and Opportunistic-

A crisis could prove to be an opportunity, so it is imperative not to let our long-term goals suffer due to our short-term conservativeness.

A crisis can open up opportunities in real estate. So, it would be sensible to diversify geographically. Investing in Fractional ownership investments (where you are one among multiple investors participating) allows high-net-worth investors with limited cash the opportunity to diversify, generate passive income, and access high-quality real estate.

Note- It is to be noted that, this is not related to publicly-traded REITs. Publicly traded REITs may be a suitable option only for few investors.

 

Time Is Money-

In investments, the time has exponential value. The return has an added value, and the principle has a multiplication value. The most important variable is time. Factors such as time horizon, risk profile, and the investment amount play a big role.

 

Diversification Is Key-

On the occurrences of Black swan events like COVID-19, asset-wise diversification is imperative. A portfolio should provide the essential liquidity with a bit of flexibility without compromising on long-term goals.

The more negative correlation you have towards the asset classes in your portfolio, the better will your risk-adjusted return be.

While considering Equity investments, avoid investing in cyclical stocks.

Ultimately, every portfolio has to be tailor-made, and we at cPROFIT build Model portfolios with the support of internal and external research, comprising of multi-assets including global assets. We offer this with an element of customization.

 

Emphasize Liquidity-

Fear of job loss and business loss is very likely during a crisis, so there is a necessity to revisit your portfolio to check if there is adequate liquidity. An investment portfolio should help you sustain for at least 12 months, so it's good to consider investing in a combo of Liquid mutual funds, savings accounts, and fixed deposits.

 

How Much Liquidity Do I Need?

The question of how much liquidity is required is individual-specific, as it's significant to factor in their current investment pattern, job profile, goal periods and job risk, etc.

 

Health Insurance-

A health insurance policy can either be company-sponsored policy or a policy bought by you. Such policies provide cover only for expenses beyond 24 hours hospitalization. Anyway, when someone has a health insurance policy, in the absence of cashless facility, they could apply for reimbursement of the medical expenses post the discharge. Further not all health insurance policies cover consumable costs, which are expensive in the case of COVID-19.

A Company-sponsored policy may only cover employees during the employment tenure and this could be part of a group cover. For the record, there is no mandate for a company to provide health cover to its employees. In scenarios such as job losses, career switches, early retirements, getting a new policy would be difficult. Hence, it is advisable to obtain an exclusive health insurance policy for self & family apart from company provided health cover.

 

Insufficient Cover-

Another problem with insurance relates to having insufficient insurance cover. In a family of four where the family head is less than 45 years of age, he/she needs to have a minimum of Rs.10 -15 lakhs of cover today. A family head above 45 should have at least 20-25 lakhs floater cover.

In short, health insurance will give you peace of mind during a medical emergency. Cashless Hospitalisation, Pre and Post-Medical Expenses bearing High ICU, and other treatment charges are all added benefits apart from tax benefits.

 

What Tax Benefits Can One Claim With Insurance-

You (as an individual or HUF) can claim a deduction of Rs.25,000 under section 80-D on insurance for self, spouse, and dependent children. An additional deduction for insurance of parents is available up to Rs 25,000 if they are less than 60 years of age. If the parents are aged above 60, the deduction amount is Rs 50,000, which has been increased in Budget 2018 from Rs 30,000.

 

Note-

Pradhan Mantri Jeevan Jyothi Bima Yojana (PMJJBY)

PMJJBY is a one-year term life insurance policy. This scheme offers coverage of Rs. 2 lakh with a yearly premium of just Rs. 330. PMJJBY is available for people in the age group of 18 to 50 years. To know more about PMJJBY,click here

Other points to keep in mind-

• Pay your insurance premiums on time to avoid lapses
• Keep your investments organized at all times. When you organize investments, make sure to save the passwords in a handbook.
• Write a WILL and get it registered so that the next generation can bequeath your assets without any legal implications.
• Make your family aware of your investment proofs, health insurance, and other documents.
• Revisit your portfolio and rebalance it, if required. But do not let your short-term conservativeness or fear cloud your long-term goals.

 

As no individual is alike, each portfolio contains a different approach to build wealth. cPROFIT can help you build an All-weather portfolio that could make an individual achieve all his/her financial goals and much beyond. We would love to be a part of your life.

 

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