{"id":8827,"date":"2020-04-20T06:21:23","date_gmt":"2020-04-20T06:21:23","guid":{"rendered":"\/blog\/?p=8827"},"modified":"2020-04-20T06:21:52","modified_gmt":"2020-04-20T06:21:52","slug":"how-can-you-protect-your-wealth-in-the-midst-of-an-economic-downturn","status":"publish","type":"post","link":"https:\/\/tata-blog.osian.dev\/blog\/wealth-services\/how-can-you-protect-your-wealth-in-the-midst-of-an-economic-downturn\/","title":{"rendered":"How Can You Protect Your Wealth in the Midst of an Economic Downturn?"},"content":{"rendered":"\n

A recession is one of the worst times to\nlive through. Economic slowdown results in unemployment, lowered demand, and a\nlack of investment opportunities. This, in turn, causes psychological distress\nby adding a direct strain on one\u2019s finances. Fortunately, there are ways to\nsafeguard oneself from the disastrous consequences of a recession. Here are\nsome tips for how you can protect yourself in case the economy goes south.<\/p>\n\n\n\n

Avoid Discontinuing SIPs<\/strong><\/p>\n\n\n\n

Your SIP<\/a> is a systematic medium to long-term investment plan in mutual\nfunds of your choice. When markets grow weak and the net asset value of your\nmutual funds decreases, this can put most investors in a state of unrest. On\none side, you are experiencing an economic downturn, on the other side, your\ninvestment is turning into an added financial strain. However, during this\ntime, most SIPs\nfetch investors more units. Once the market recovers, a few years down the\nline, the units will have accumulated into a huge corpus. Hence, financial\nexperts recommend to not let go of your SIPs because of an economic downturn.<\/p>\n\n\n\n

\"SIP<\/figure>\n\n\n\n

Source: The Economic Times<\/p>\n\n\n\n

Your investment time horizon should be long\n(5+ years), for your SIPs\nto actually amass gains without being affected by the recession. If you are\nonly investing in a SIP\nfor 2\u20133 years during an ongoing recession, you should expert modest returns at\nbest. In case you are nearing your target investment goal and the recession\njust hit, its best to transfer your corpus into liquid funds. This prevents it\nfrom being impacted by market movements and serves as easily accessible backup\nfunds for surviving the recession.<\/p>\n\n\n\n

Create A Nest Egg<\/strong><\/p>\n\n\n\n

This is a no brainer, however, its\nsignificance must be emphasized. A \u2018nest egg\u2019 is money you are saving to put to\nuse for some unanticipated event in the future. In other words, this is your\nemergency fund. Your investment plans might be a source of income, but they are\nnot liquid. If you are let off during an economic downturn, you will run short\nof liquid cash. This can be prevented with the help of saving a sizable amount\nin advance in fixed deposits, savings accounts, short-term debt funds, and\nother saving-oriented financial tools.<\/p>\n\n\n\n

This amount can be used for any financial\nemergencies like medical bills, and instant loan repayments, or regular\nexpenses like utility bills and groceries. Ideally, your emergency fund should\nbe large enough to fund the costs you and your family incur for 6 to 12 months\nas recessions can last this long before the clouds begin to part. You can\npre-calculate your personal\/family\u2019s monthly costs for a year to estimate the\nexact amount you should be saving as a backup fund.<\/p>\n\n\n\n

Diversify Investments with Gold<\/strong><\/p>\n\n\n\n

To cushion oneself from the dip in equity\nmarkets during a recession, experts recommend keeping 10\u201315% of your investment\nportfolio as gold. During times of uncertainty, this is a common practice among\ninvestors as gold is a hedge against inflation and economic slowdowns.\nCurrently, with India\u2019s economic growth lagging and the rampant coronavirus,\nthe prices of gold have surged. Physical gold itself might not be the best bet.\nInstead, consider gold\nfunds.<\/p>\n\n\n\n

\"Gold<\/figure>\n\n\n\n

When you purchase physical gold as bricks or\njewelry, there are added charges, such as GST and making charges. There are also issues with\nkeeping it safe, liquid, and pure over time. Gold Funds, on the other hand, are mutual funds\nthat invest in various forms of gold. This investment can be in the form of\nphysical gold or stocks of gold mining companies. Gold Funds that invest in physical gold offer\ninvestors the convenience of buying pure gold at a lower cost to physical gold.\nBesides, there is no possibility of theft and investor has the ease of selling\nthese units at the market linked price at the click of a button.<\/p>\n\n\n\n

Get a Health Cover<\/strong><\/p>\n\n\n\n

The stress of saving every last rupee during\na recession is already high. It can become worse if you or a close family\nmember becomes unexpectedly ill or has an accident. The worst-case scenario is\nthat you will not have the requisite funds to pay for their medical costs.\nSecuring funds in health\ninsurance can insulate you during an economic crisis. In case the\npolicyholder incurs a medical emergency during this time, your insurance\ncompany will cover all the medical costs of the policyholder and you need not\nworry about securing the funds.<\/p>\n\n\n\n

Individual health insurance plans\nmight serve you better than group health plans. This is because if you lose\nyour job during a recession, depending on your group health insurance policy, you may or may\nnot be able to receive medical cover. <\/p>\n\n\n\n

In conclusion, consider diversifying your portfolio with gold funds, protecting you and your family with health insurance, building an emergency fund, and keeping long-term SIPs running during a recession to protect your wealth. <\/p>\n\n\n\n

Know More<\/a><\/div>\n","protected":false},"excerpt":{"rendered":"

A recession is one of the worst times to live through. Economic slowdown results in unemployment, lowered demand, and a lack of investment opportunities. <\/p>\n

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