Don’t forget your finances in your quest to make extra money from mutual funds

What are you waiting for? The market is already down 30%. Sell everything and buy some good quality stocks (or good equity mutual funds), and you will make huge returns in no time.

You might have heard similar statements in the last few days. Most investors may be extremely nervous about the free fall in the stock market in the aftermath of Coronavirus pandemic. But some brave hearts think it is a good opportunity to make a killing?

You may try to invest in a staggered manner in your favourite mutual fund schemes, but you should remember that there is no guarantee that the market may not fall further. If that happens, do not panic or become despondent. Go on investing and remind yourself that you are in for the long haul.


Oh, yes, you should invest only if you have a long investment horizon of at least seven years. In fact, many mutual fund advisors are telling their clients that they should not invest in equity schemes with a horizon of five years anymore. The definition of long-term has suddenly increased to seven years from five years.

Another important point to remember is do not proceed with your money-making plans without taking stock of your personal finances. As said earlier, these are troubled times. Nobody knows the likely fallout or how long it might last. So, you must be prepared for the worst.

For example, setback to your health or someone in your family. A job loss to parents, spouse, etc. These scenarios might test your financial preparedness to face a crisis. Your investment portfolio might be 50% down.

You may not be able to tide over the situation with your usual emergency funds that might take care of your living expenses for six months. You might need a larger cushion, especially if you have financially dependent parents and children. So, first set aside money for such eventualities before proceeding with your long-term extra investments.

Remember, if you need the money in the next few years, keep it safe in a bank deposit or debt mutual funds. Do not invest it in equity schemes. If you need the money in an emergency, you might be forced to sell your investments at a loss.

Run a financial health check-up. Ensure that you have a health insurance cover for your entire family, adequate life insurance to take care of your family in case of an eventuality, and contingency fund to tackle any situation arising out of the coronavirus situation.