Market is down, should I pause my investment or increase it? Gold is down, should I buy more? What to do with my fixed income portfolio? How should I set my monthly budget as prices have been increasing?
Well, an average investor is facing these many questions since past few months!
Post Covid, we saw noticeable growth in the market performance. Economy got refreshed and many new developments were on.
But, since last 3 to 4 years, markets have shown a status quo and negative returns trajectory intermittently.
Reasons are many. Prominently being the tariff uncertainties, geopolitical issues, currency fluctuations etc.
A new investor, who has entered the market in this phase, is seeing at the portfolio and lounging for the ‘Green marks’ in their portfolios.
In all this, yesterday, The Reserve Bank Of India increased Repo Rates by 25 basis points.
How and why was this move taken by the RBI?
Well, major reasons are Global uncertainties due to wars and geo-political tensions, rising bond yields, rising inflation and high prices of Brent crude oil.
While dealing with these global phenomena, Indian Economy put its feet strong as possible so far. But, The RBI had to step in to take this move as one of the measures to curb inflation.
As an investor and as a person managing money matters, how we should look at it? Any measures to take about our money? Let see-
- Look how your income sources are stable all along:
Recently, many sectors have been experiencing volatility. Some sectors have seen sudden layoffs, some businesses e.g. related to import-export sector, have seen changes in their profit flows due to rupee depreciation.
If your income streams are little volatile, then reconsider your ‘Emergency Fund’ requirement. Try to increase this significantly. It will help you to sail through income fluctuations.
Also, revisit your insurance policies. If you have not yet applied for any suitable term and health insurance policies, then please initiate.
- Review your portfolio:
These market corrections have given very low to negative returns to many. Instead of reading the news and getting panic about the market corrections, get your portfolio reviewed once.
Portfolio review doesn’t mean, you need to pause your investments or redeem the one which is negative. It means, checking on your asset allocation as per the goal, revisit the investment options independently and continue to invest if no changes are required.
Please note that, debt and equity markets work differently. So, look at every investment option accordingly.
If your goal period is ending soon, then, make portfolio changes accordingly, in order to lock your portfolio returns and pay for the goal as assigned.
- Ignore the noise:
Everyday some or the other predictions about the economy, market and geo-political situations keep on coming. They can create confusions in our understanding about our portfolio and shake own confidence about, money management.
So, look and read this news vigilantly. Don’t take any panic decisions.
- Revisit your loan requirements:
With high repo rates, our commercial loans can become costlier now. We need to revisit our loan requirements and check; do we really need those loans?
If the loans are needs based, e.g. Housing loan, then opt for it. For any other loans for our aspirations, take a pause. Look at the cashflows and make a room for possible increase in the EMIs.
Instead of larger EMIs for aspirational loans, its better to invest in suitable ways or take a pause!
- Revisit your debt portfolio:
Due to increase in repo rates, interest rates on Bank FDs can increase as they share direct relationship with repo rates.
On the other hand, debt mutual funds may face downward movement of returns because they face inverse relationship with repo rates.
So, if you are heavily invested in long term debt fund, then you need to revisit the same. For investments in FDs, you may get higher rate of interests if its due for renewal.
The journey of an investor is filled with learning, unlearning and re-learning many things. Market volatility, economic changes, shape this journey and our behavior as an investor.
So, prepare for uncertainties while looking for better fulfillment of your goals.