Many individuals have not started their investments in Equity Linked Saving Schemes yet. This is largely due to job threats and pay cuts that have been caused by the pandemic.
Here are some measures that you can take to get your savings investments back on track.
Evaluate how serious the threat is. If your industry is facing a threat, and the situation is not likely to improve even after the lockdown is lifted, you need to assess how vulnerable your position will be. Speak to your seniors for better clarity. If you feel that your job is under threat, focus on enhancing your contingency fund and your liquid assets to help you sail through. Till the situation gets better, investments can take a backseat.
If you think you will face a pay cut, assess the impact that it will have on your savings and investment plans. If these are likely to be impacted, slash your discretionary expenses, so that you can ensure that your long term investment plans are not impacted in any way.
Even if you cannot salvage the situation, it is completely alright. Focus more on your contingency plan and create more liquid assets.
It makes a lot of sense to have a large contingency fund that can take care of all your living expenses for at least a year. Coupled with your liquid assets in the form of bank deposits, and debt funds; you should have enough to tide over the situation for at least a year.
But what if you can barely get on with your long term investment plan, and there is no extra money to invest in tax saving mutual funds?
For the present time, pause your investments in other open-ended mutual funds. Instead, start investing in tax saving mutual funds to help take care of all your tax saving exercises for the year. ELSS is also an equity mutual fund, thus assign these investments to your long term financial plans. This ensures that you do not disrupt both your long term investment plans and tax saving plans.
Investors can also consider recycling their old ELSS investments in this dire situation. Recycling is the practice of selling an old ELSS investment, which has already completed the lock-in period and then reinvesting your money in an ELSS to claim the tax deduction.
MF investors are not very keen on this investment since it adversely impacts your investment and saving share. However, tough times like these to call for such measures.