Discover innovative techniques for securing your family’s financial future during economic downturns.
Picture waking up one day only to discover your stock market investments have plummeted by 40% in just a month. How would you react? This scenario unfolded with the onset of the COVID-19 pandemic, leaving many investors in shock, prompting panic selling. The ensuing lockdowns further exacerbated financial challenges for countless individuals. To navigate such turbulent times successfully, let’s explore techniques to ensure the financial resilience of you and your family.
Bulletproof Insurance: Shielding Your Income
The foundation of family financial survival, both in prosperity and adversity, lies in robust insurance coverage. Protecting your family’s income from unforeseen tragedies is paramount. A standalone term plan, distinct from mixed investments, is crucial. Opting for insurance with a money-back guarantee may seem tempting, but it often results in subpar returns and inadequate coverage, depriving you of the best of both worlds.
Building a Financial Fortress: Emergency Corpus
Beyond insurance, building an emergency corpus is the next strategic move. This safety net, reserved for economically adverse events, safeguards your finances from unexpected disruptions. This corpus is a financial lifeline during income fluctuations triggered by unforeseen events like lockdowns.
Strategic Asset Allocation: Personalised Financial Blueprint
Crafting a tailored asset allocation strategy is pivotal. While general rules exist, personal finance demands a personalised touch. A common guideline suggests equity allocation as 100 minus your age. As you age, reducing exposure to high-risk assets like equities becomes prudent. Diversification into debt, offering inflation-beating returns with lower volatility, and gold, a safe haven during uncertainty, is advisable.
Goal-Oriented Investing: A Shield Against Panic
Linking each investment to a specific goal is a powerful strategy. When faced with the urge to sell during a market downturn, recalling the purpose of each investment curbs impulsive actions. This approach ensures adherence to your investment plan, keeping your goal achievement on track.
Maintaining Calm Amidst the Chaos
The paramount rule in financial survival: Stay calm during market downturns. Recognise that 80% of returns come from just 20% of the time. Missing out on the bad days results in subpar returns. By remaining composed, you position yourself ahead of the crowd. Cultivating this trait is crucial for individuals and investors alike.
These techniques serve as a roadmap for financial survival during economic distress. Adequate insurance and emergency funds serve as the foundation. This necessitates strategic asset allocation and maintaining composure during panic-inducing situations. While seemingly straightforward, implementing these steps in real life can pose challenges. Yet, those who integrate these practices into their financial lives will successfully navigate tough times.
*The article is for information purposes only. This is not an investment advice.