1 April 2021
By Lace Llanora
   
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4 things you can do to grow and protect your money during a pandemic

 

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Many of us today are concerned about our health and finances. Financial upheaval and health concerns caused by COVID-19 raises a lot of questions on how we should navigate during this time of distress and uncertainty. You must be wondering whether is it wise to save or invest during this pandemic.

Below are 4 steps you can take to help ease your worries and allow you to take action and focus on what you can control.
 
1. Acknowledge the situation but avoid emotional decisions
The prices of your investments may be significantly lower today than it was before COVID-19 happened. It’s a bitter reality but something you must acknowledge by understanding where you are today to allow you to review the pros and cons of different options before making the best decision for your future.

When pandemics or other similar crisis happens like the 2008 financial crisis, sometimes, the best thing to do is nothing. Unless you consider yourself an investing expert, the last thing you want is to realise an actual loss when you sell your investments at an unfavorable price.

While each market downturn is unique, take time to review the difference between paper and actual loss. When the market is down, most investors do not lose real money. What they have is an unrealized loss or paper loss.

Fund managers will know what to do during crisis. If you have invested in mutual funds, let the experts navigate through the risks and opportunities during this pandemic.
 
2. Review your risk tolerance
When it comes to investing for your future, every person has a different propensity for risk. You need to understand how much risk you are willing to take and which types of risk worry you most. According to Michael Manuel, Chief Market Development Officer of Sun Life Asset Management, it is easy to have high self-esteem and take more risks when the market is performing well. It is possible that during a bull market, an investor will invest more and over-extend their position than what they are really capable of.

Now that we are in a crisis, it is a good time to review your true ability to take risks. This is also the reason why working with a financial advisor is essential. A financial advisor can help assess your individual risk profile based on the risk you are willing to accept. Overestimating (and underestimating) your risk profile can be a costly mistake.
 
3. Maintain your good financial habits
Experts recommend having and sticking to a routine even during times when confined at home. Not only does this benefit our mental health but our sense of productivity as well.
When it comes to finances, a pandemic should not be an excuse to throw perfectly good money habits such as having a budget, mindful spending, and regular investing. Continue to build an emergency fund and set up a recurring transfer to a savings account that you can easily access in the event that you need the funds.

Implementing and maintaining good financial habits will better position you to weather this, as well as any future storms.
 
4. Top-up your investments if you have cash
If you're financially secure with some extra cash, you can consider buying stocks that have fallen due to the crisis. Take this opportunity to accumulate and grow your investments. According to Michael Manuel, Chief Market Development Officer of Sun Life Asset Management, your worst performing funds can be the best performing funds tomorrow. The longer we wait for market recovery, the farther behind we become in riding it.

It is also important not to invest more than you can. There's one golden investment rule that you should always keep in mind: never invest money that you can't afford to lose.

Don't let fear steer you away from your investment plans. Instead, prepare to take this rare chance to review your priorities and find opportunities to improve your financial position for the future or for when the next crisis hits.

To better manage your personal finances, talk to our advisor and let them help you plan ahead for a brighter future.
 

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