Investment in the time of coronavirus: Insurance, savings take top slot

MUMBAI: The pandemic has changed the income and investment landscapes dramatically over the past nine months, forcing investors to rejig their financial portfolio for long-term security. Investors’ preference for insurance, savings and the size of emergency funds have gone up, while building a corpus for wedding expenses has come down the priority list. There has not been much change in their preference for retirement, which is still among the top three.

“For several people, while children’s education remains a top priority, their wedding as a long-term goal has fallen down the preference list from being one of the top three during pre-Covid days,” said Mukund Seshadri, a city-based mutual fund distributor. According to financial advisers, not only people’s preference for health and life insurance has gone up as one of the top long-term goals, but the amount of insurance people are buying has also increased.

Among the other changes to people’s long-term financial plans that are being observed are related to investments in real estate, ownership of car and leisure travels. People’s preference for real estate is now higher than before, while their desire to own a car has come down. Also, earlier people used to plan and invest for leisure travel, both domestic and foreign destinations. Those plans now have been put on the back burner.

Industry veterans said the pandemic has also strengthened some of the rules of personal financial planning. The lockdown months have once again proven that people should prioritise their ‘needs’ over ‘wants’. “The pandemic has made people realise their true expenses to have a comfortable life,” said Gajendra Kothari, MD, Etica Wealth.

“People are concentrating more on savings and less on expenses,” Kothari said. According to Seshadri, for years financial industry veterans have been asking people to ‘pay oneself first’, meaning save first before meeting their expenses. “The pandemic has taught that to people quickly,” he said.

Seshadri and Kothari agree that the pandemic has also taught people the importance of having a contingency fund. “People are now aiming to have a contingency fund that can meet their monthly expenses of up to a year,” Kothari said. Earlier, financial planners used to advise clients to build a contingency fund that would last them 3-6 months without any income, Seshadri said.

Along with such learnings and changes to people’s savings and investing habits, there has been one negative development that financial advisers are warning people to be careful of. “A large number of people have taken to direct stock investing. In the long run, such investments may end on a negative note,” Kothari said.