FINANCIAL MISTAKES TO AVOID DURING PANDEMIC. - Deepstash
 FINANCIAL MISTAKES TO AVOID DURING PANDEMIC.

FINANCIAL MISTAKES TO AVOID DURING PANDEMIC.

F&O – Weapons of mass destruction - As Warren Buffet once observed, Futures and Options are financial weapons of mass destruction. These financial instruments played a pivotal role in the 2008 financial crisis. So, it is better for lay investors to stay away from these financial weapons.

Reduce financial leverage – Never take loans that will make you walk on the brink. EMIs of your financial leverage like housing loans, education loans, or car loans should not be more than 10-20 per cent of your income. It should be kept at a bare minimum, as far as possible. It is important to evaluate your repayment capacity carefully before signing up for any financing facility, as an unaffordable loan could not just destroy your finances but may also lead to a loss of a precious asset and cause immense psychological stress along the way.

Patience! This Too Shall Pass - People should not pay heed to fake news doing the rounds on social media. In the month of March, when the market was crippled with the effect of the pandemic, a huge number of investors either sold or stopped their investments. The ones who showed their patience during that time and continued their investments, are today reaping the benefits as the market is touching new heights daily.

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A financial crisis

A financial crisis is often associated with a panic or a bank run where investors sell off assets or withdraw money from savings accounts.

  • Asset prices drop in value.
  • Consumers are unable to pay their debts.
  • Financial institutions experience liquidity shortages.

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Asset Management

Asset management is the practice of increasing total wealth over time through acquiring, maintaining, and trading investments that have the potential to grow in value.

However, we must keep in mind that asset management has a double-barreled goal which increases value while mitigating risk (this is usually dependent on the client's tolerance for risk).

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Investment Tips
  • Set Your Objectives. (setting long-term objectives can be of great benefit.)
  • Level of Risk. (The level of risk associated with the investment option you choose must be carefully analysed before you put your money into something.)
  • Control Over Emotions. (One of the primary requisites of investing in the stock market involves controlling your emotions.)
  • Study the Stock Market. (Order types, financial definitions and metrics, various kinds of investment accounts, timing of investment, methods of selecting stock, etc.)

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