The doubt surrounding COVID-19 have impacted financial management. Stock markets continue to boom after first unlock and are at an all-time high. This situation is volatile and unpredictable. Bank FD interest rates are reducing. These are main asset classes popular with Indian investors, and constantly form a major part of every Investment portfolio.

Covid-19 has restricted many of the freedoms that we took for granted.  Although there is no full lockdown in the country, many restrictions still persist. For many, a sudden job loss, a pay cut, the business has gone in loss due to pandemic & lockdown restrictions.

Financial freedom, Retirement planning, setting & achieving financial goals now has different meanings for people at different age groups. 

We should not feel demotivated or defeated due to these situations though. We should actively think about the next steps towards our set financial goals, retirement planning, and being successful in life.

Here are a few steps to consider for starting or rebalancing your portfolio and align with your financial goals,

Be calm

This is not the first crisis, and definitely won’t be the last one. Even though the situation might seem uncertain, avoid making illogical decisions that can harm your long-term portfolio. Liquidating good investments, discontinuing SIPs to pay for unexpected expenses can set back your retirement goals by years. Invest regularly.

The good financial habits

Good financial habits will always help you in achieving your financial goals and being stable financial state.

• Spend less than your income
• Build 5-6 months emergency fund.
• Write your daily expenses
• Grow your income by different sources or income streams.
• Minimize high-interest rate loans
• Don't waste time
• Buy good health insurance
• Set goals
• Invest Wisely & increase it every year.
• Read

Renegotiate the interest rate on your loan

Interest rates have not just been reduced for bank FDs, but loans also. Check and ask the bank to adjust the loan interest rate accordingly.

Diversify your portfolio

To minimize risk and maximize returns, the best way is to diversify your investment. The diversification should be aligned with your age and risk profile. For example, if you are 30 years old, you can invest 70% in equity or risky asset class & 30% in debt asset classes by thumb rule. The investment percentages in each type of asset class may change case by case for each individual.

Now we will see some best investment ideas,

Bank Fixed Deposits

A bank fixed deposit is generally considered a safer choice for investing. As per the need, one may opt for monthly, quarterly, half-yearly, yearly. 

FDs are for those who are not willing to take any risk. However, low-risk investments come with low returns. If you have some extra cash in your hand, then you can put it in fixed deposits. The interest rate on fixed deposits is not that attractive but it can accumulate a considerable sum if invested for the long term. 

National Pension System (NPS)

National Pension System (NPS) is a pension cum investment scheme launched by the Government of India to provide old age security to Citizens of India. It brings an attractive long-term saving avenue to effectively plan your retirement through safe and regulated market-based returns. The Scheme is regulated by Pension Fund Regulatory and Development Authority (PFRDA). National Pension System Trust (NPST) established by PFRDA is the registered owner of all assets under NPS.

Opening an NPS Account has its own advantages as compared to other pension products available. 

Below are few features which makes NPS different from others:

• Low-cost product
• Tax breaks for Individuals, Employees, and Employers
• Attractive market-linked returns
• Easily portable
• Professionally managed by experienced Pension Funds
• Regulated by PFRDA, a regulator set up through an act of Parliament.

Public Provident Fund (PPF)

PPF has a long tenure of 15 years & you will get the great tax-free benefit of compounding, especially in the later years. Further, since the interest earned and the principal invested is backed by a sovereign guarantee, it makes it a safe investment. The important thing to note here is that the interest rate on PPF is reviewed every quarter by the government. The current rate is 7.1%.

Who can open:

• a single adult by a resident Indian.
• a guardian on behalf of minor/ person of unsound mind

Sukanya Samriddhi Accounts

Sukanya Samriddhi Yojna is a small deposit scheme for a girl child, launched as a part of the ‘Beti Bachao Beti Padhao' campaign. Users can find detailed information about this scheme for a girl child. An attractive interest rate of 7.6% is fully exempt from tax under section 80C.

You can deposit a Minimum INR. 25​0/-and Maximum INR. 1,50,000/- in a financial year. Subsequent deposits in multiples of INR 50/- can be made in lump-sum. No limit on the number of deposits either in a month or in a Financial year.

Who can open:

• By the guardian in the name of a girl child below the age of 10 years.
• Only one account can be opened in India either in Post Office or in any bank in the name of a girl child.
• This account can be opened for a maximum of two girls in a family. In case of twins/triplets girls birth, more than two accounts can be opened.

Closure on maturity:

• After 21 years from the date of account opening.
• Or at the time of marriage of girl child after attaining the age of 18years.(1 month before or 3 months after date of marriage).

Direct investment in stocks

Investing in stocks might not be that easy for everyone in a volatile & unpredictable market. This asset class has great growth potential and the capacity to beat inflation. Long-term investment in this asset class gives you very good returns. 

The problem is it is difficult to pick the right stock & time the market. If invested without studying the company/stock, there is a huge risk of loss. Convenience wise it is very easy to open the Demat account and start investing in the stock. There is another method also to invest in stock, the 'smallcase'. It is a basket of stocks that reflects an idea.

Mutual Funds

Mutual funds are professionally managed by fund managers who have an excellent track record of managing investment portfolios. Here you will get options and benefits of investing your money in diversified asset classes like equity, debt, hybrid, balanced, index, money market, sectoral/thematic. You get transparency, convenience, flexibility, professional management at a low cost. You don't have to study the stocks but the fund manager with his team will do it for you. You can start investing from Rs. 500. You can also invest monthly through SIP (Systematic Investment Plan). You can do it yourself as 'Direct' if you have time to manage your portfolio of different funds or go through a registered Mutual Fund distributor as a 'Regular', and he will manage your MF portfolio for you. Through SIP you will get the benefit of Rupee cost averaging and compounding over the long term to get respected returns.

Gold

Buying gold in the form of jewelry may not be called an investment and you will not get good returns since it's not in pure form and there will be making changes. Apart from that, you will have fear of theft and concerns over a safe location to store. If you buy Gold in pure forms like coins, biscuits, etc. then you can call it an investment but there will always be a safety concern.

There is another cost-effective way of owning gold is via gold ETFs.

Real Estate

Real Estate investment has mostly done if you have a large surplus amount saved with you. The flat/house that you live in can't be considered as an investment, since you are using it for yourself. If you are able to buy a second property then it will be called an investment.

You can get rental income from the same or the price will appreciate over time depending on market condition and locality.

Senior Citizen Savings Scheme (SCSS)

The Senior Citizen Savings Scheme (SCSS), launched in 2004 is a deposit scheme introduced by the government of India to provide guaranteed returns to senior citizens through a safe investment. This scheme ensures a regular income stream for senior citizens in retirement. There shall be only one deposit in the account in multiple of INR.1000/- maximum not exceeding INR 15 lakh. The account holder will get an interest rate of 7.4 ​% per annum.

Who can open:

• An individual above 60 years of age.
• Retired Civilian Employees above 55 years of age and below 60 years of age, subject to the condition that investment to be made within 1 month of receipt of retirement benefits.
• Retired Defense Employees above 50 years of age and below 60 years of age, subject to the condition that investment to be made within 1 month of receipt of retirement benefits.
• The account can be opened as individual capacity or jointly with a spouse only.
• The whole amount of deposit in a joint account shall be attributable to the first account holder only.

Hope this article helped you decide your next steps. Subscribe to our newsletter & get posted with new articles.