Get Your portfolio In order during the lockdown

Get Your portfolio In Order During The Lockdown

Though the pandemic has created some dull and gloomy situations, with commotion and chaos everywhere; there are still some bright spots. Being stuck at home has given us all a lot of time, and what could be better than using it productively. Staying positive does take a lot of effort, but we are sure that you can nail it.

Here are a couple of things to do during the lockdown, to make sure you stay financially healthy at least.

1.    Set up a financial plan

A very important aspect of your investment journey is having an itinerary with you. And this is a good time to develop one. Make sure that you take out some time to create your financial plan. Evaluate whether your savings are enough, or if you need to be saving more.

-        Spend some time thinking about your financial goals. A smart investor is someone who can list out the goals for which investments are being made.

-        Consider dividing your goals into categories like the near term, mid-term, and long term, and then analyze how much you need to save and invest to achieve these goals.

-        If you have investments already, assign them to different goals. This will give you a sense of control, and you will feel in charge.

You can also use online tools and calculators to ascertain your saving and investment requirements, to be able to better build your financial plans.

2.    Clear your portfolio

Though most investors start with a few funds, they keep on adding them over time. Eventually, they become more of a collector than an investor. And because collecting funds is easier than reorganizing your portfolio, one never gets the time to clean up.

In the present situation, this ‘time’ excuse will not work. Thus, if you are usually caught up doing a variety of tasks and never have time on your hands, now is a good time to finally reorganize your portfolio.

Now, most investors would think that this means trimming down the number of funds. But even a single fund in itself is a diverse portfolio, with easily around 30 or more stocks. This means that having too many funds will give you hundreds of stocks in small proportions, which will then likely hamper your returns. Moreover, managing too many funds is a hassle in itself.

-        While there is no specific number, try and stick to five funds; unless of course, you have reasons to hold more.

-        First, go after the ones that weigh less than 5% in your total portfolio. Take time to evaluate their viability, and whether you need them. And if you do, consider increasing their allocation, since 5 percent is too less and would not make much of a difference.

-        Perhaps you could consider exiting funds that have a narrow investment universe. These include thematic and sectoral funds, for instance.

-        Prefer funds that have shown consistent performance in the long term. Also, choose funds from different fund houses to ensure that you have adequate diversification.

3.    Rebalance your assets

Asset allocation is another aspect that you need to reconsider. The equity market is declining dramatically, and as a result, your target allocation between equity and debt might get hampered too. Moreover, given the sharp fall in markets, now is a tax-efficient time to make portfolio changes, since the incidence of capital gains will be minimal or non-existent.

 4.    Avoid non-essential spending at all costs

The last month was an eye-opener for all those who felt like they just could not save money. Because of the lockdown, the options for discretionary spending have also decreased, which means that you now can revisit your expenses ad spending habits, and cut down on them.

Think about the past month and figure out areas where you did not spend. Then evaluate if you can continue without spending on these areas for long. If you think that you can, consider starting a SIP with this saved money.

5.    Go digital

The pandemic has accelerated digitization in the country. more and more people are working from home, and the importance of going digital could not have been any more obvious than this. The digital revolution is on an all-time high. From buying groceries to making fund transfers, everything is taking place online. And investments are no different. Everything is now a few clicks away, and if you are KYC compliant with the facilities of online banking, you can invest online easily.

All that you need to do is create your account by entering your PAN and DOB on the website. Once your KYC has been verified, you will be asked to enter personal details, bank details, and nominee details. All that you then need to do is select your scheme, enter investment details, and transfer money to get started!

Even online KYC is possible these days. You simply need to submit a few digital copies of certain documents and then go through the authentication process through a video.

And if you have never invested online, now is the time to drop age-old habits and get familiar with newer modes and the digital world!