Wednesday, April 8, 2020

MONEY LESSONS FROM COVID

Greetings,
The sharp, unforeseen, unprecedented, ruthless butchering of Stock Prices across the Globe has stunned not just the lay investors but even the Experts.
If any expert says I saw it coming.either he is God or he is lying.
A market crash of more than 40 per cent in a matter of one month is completely unprecedented. 

Your friends, parents, Insurance agent would be now sitting on your head and showing you with GLEE how if you had put money in FD, you would have got more…
Only if had taken that  Money Back Plan…..
See even your 3-5 years sip is less than SB returns

Let them…
They rarely get chance…..
Let me tell you…
A sip of Rs.10,000 in BIRLA GENNEXT FUND for 45 months…

Invested Amount = 4,50,000
Market Value = 4,09,000

i.e. Rs.4,50,000 invested was worth just 4,09.000…less than invested value even after nearly 4 years of SIP.
But….the average normal sip tenure is for 5 years and if the same was continued
At the end of 5 years…
Your 60 sips of Rs.10,000

Invested Value = Rs.6,00,000
Market Value = Rs.9,10,000

(doubled in 15 months)
And the same continued till 175 sips would have been

Amount Invested = Rs.17,50,000
Market Value = Rs.63,13,931

So at the 45th month, the investor would have definitely faced ridicule and doubted himself and his advisors ability….
but as I have told so many times..

CORRECTIONS ARE TEMPORARY

GROWTH IS PERMANENT

Remember, your friend, your insurance agent, none of them are responsible for your Wealth Creation.

We as your Well Wishers, MFDs, hand hold you and do try to make sure you reach your goal but if, some investors, do behave irrationally and REMOVE their money at this time of the market inspite of our prodding….we can only wish them good luck.

This COVID pandemic has made us learn some lessons which we should never forget to make sure we 
DON’T RETIRE RICH 
but actually 
F.I.R.E & RETIRE WEALTHY. 

Actually, I would say RE-LEARN because its always the same lessons but maybe the reasons and the method would be different each time.

1.    EMERGENCY FUND IS A MUST.
Those who followed our blogs would have definitely kept barest minimum of 3 months of Expenses in an Emergency Fund and for them…it would sure prove to be NECTOR in these times.

Yes….it seems so stupid at times to see your 6 months of expenses earning you 5.5% to 6% in a liquid fund when other instruments are giving you double digit returns., but as insisted by us so many times….each asset class has its place in the Sun and Emergency Fund is for Emergencies…..which the current LOCKDOWN has turned out to be.
The value of Emergency Fund is in front of your eyes now. Its for those period of time, when there is a shortfall in income.

2.    HEALTH INSURANCE IS A MUST
Sadly, even the literate class (especially the young millennials) consider Health Insurance as a money going into the drain.
I’m healthy….why do I need Health Insurance is the refrain.
Well, COVID pandemic and any illness as such does not look at the fact whether you are young or physically active…it can affect anyone, anytime.
Better to be safe than sorry.
And, by the way, almost all Insurance companies have now COVID into your existing policy.





3.    DO NOT SELL BLUECHIP TO RETAIN THE JUNK
The biggest mistake investors do in these kind of crashes is that to cover losses or pay the margin money, they tend to sell shares/funds which are in profit and retain those that are in losses.
And we all know, that Blue Chips and High Quality stocks / Funds are the ones which have fallen the  least and they are ones getting punished (by getting sold) to retain the JUNK stocks/funds.  Instead of selling off your asset, you can consider taking a loan on your Mutual funds, shares, insurance, gold, house.

4.    ASSET ALLOCATION IS A MUST.
If prudent Asset Allocation would have been adhered to, you wouldn’t have been in 100% equity.
And it would have made sure that your Debt portion would have protected your overall portfolio to a large extent.



5.    BUDGETING NEVER GOES OUT OF FASHION.
The rising income tends to make people ignore Budgeting. But the COVID has ensured that you relearn and restart to respect the Budgeting of your Expenses.
Budgeting will decide where your income will go.
Cutting down on Wants and focusing on NEEDS is the 1st step to become WEALTHY.
Budgeting is not about becoming stingy. Its just understanding the priority of the expense ladder and ensure there is no Leakage in your Cash Outflow.
You cannot control whether your job is safe or not but you can control your impulse buying and avoid unwanted expenses.




6.    TAKE RATIONAL DECISION.
Never ever take decisions based on either Fear or Greed.
Do not act in Panic or Excitement.
Remember, you are not the only person to be affected by this COVID Pandemic. Do not get emotional and take rash decision which could put your finances into a mess.
Take action only after consulting your well wishers and your Advisor. 


7. AVOID DEBT : 
Avoid debt like a plague.....rather like a Corona !!!!
Not just now even post Corona crises when things become normal...you are encouraged to strongly avoid DEBT.


WHAT YOU SHOULD DO NOW : 

1. Cancel all  Money Leakages like unwanted subscription, multiple SIM cards, etc

2. Automate Savings and Payments,  be it your SIP investments, Rds, etc. This makes sure you do not miss out on your payments and savings.

3. Get rid of all debts gradually starting with the High Interest Ones like the Credit Card Bills, etc

4. If your finances do allow, make use of the Market Fall and increase your SIP and in fact, invest Lumpsum over and above the SIP amount.

5. If your Asset Allocation and Risk Profile allow, shift some part of your Debt money into Equities.


 Save more!
Save more ? In these tough times…No..I’m not crazy…
Just look at your spending for the last 6 months and from March 15th till now….you will be pleasantly surprised to see that you would have spend (on an average) at least 40% LESS than your normal spending.
All your unwanted spending like Movies, Hotels,  Malls, Travel is all curtailed.
Okay…..some percentage maybe inevitable but still at least 25% CAN be saved.
It just proves how much MORE you can save. Isnt it?
Go ahead and SAVE IT.
Increase your Emergency Fund Corpus
Increase your Health Insurance cover
and of course, route the savings to Equity Mutual Fund and make sure that you just
DON’T RETIRE RICH BUT F.I.R.E & RETIRE WEALTHY.




No…I am not promoting mutual funds or stock markets, but it’s a hard fact that Equities (Business) is the best asset class to create True Wealth and this could well be one of the best times ever to invest and create Big Wealth. 


FINALLY,



It has been proved beyond doubt so many times that the investments should be HELD and infact investments INCREASED during challenging times.
If not, the Paper loss, will become PERMANENT loss.

DO NOT PANIC AND TAKE ANY DRASTIC DECISION.
LOOK AFTER YOURSELVES, not just physically but emotionally and psychologically.

Raat Bhar Ka hia mehman andhera


Kiske roke ruka hai savera

The Rise of MORNING SUN is guaranteed even after the darkest of Nights.

All the best,
Srikanth Matrubai






Srikanth Matrubai Author of the Amazon Best Seller DON'T RETIRE RICH
Do read the book and give your valuable feedback and request you to post positive comments on the Amazon. https://amzn.to/3cHUM6M/ You can purchase the book on amazon and flipkart Please subscribe to my TELEGRAM channel https://t.me/MutualFundWORLD/

1 comment:

  1. Thank you very much for this amazing page and all the info you have shared! It has been totally useful for us and cleared a lot of doubts. Financial Advisor in Delhi

    ReplyDelete

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