World Health Organization (WHO) has designated the COVID-19 virus as a pandemic since mid-March. The rapid spread of the virus to all parts of the world has an impact on the global economy. The uncertainty as to when the pandemic is easing also makes capital market movements in almost all countries experiencing deep corrections.
Reducing outdoor activities that continue to be encouraged is also a factor in slowing economic movements. With economic uncertainty in the midst of a pandemic like this, people need to be wiser in managing their finances. Communities need to re-manage their strategies during a pandemic like this, both for those who are active as investors and the public who are not yet familiar with transaction activities in the capital market. Here are some recommendations for financial strategies in dealing with a pandemic.
First, increase the emergency fund. No one knows when the pandemic will definitely end. Therefore, investors need to allocate more emergency funds to guard in the span of about three to six months in the future. Emergency funds can be held by cash or allocated in savings, deposits, or money market funds.
Review and rebalance the portfolio
Regular portfolio reviews must be carried out in accordance with the objectives of each investment. An investor’s risk profile can change according to changing investment objectives, age, financial conditions, and also market conditions as they are at the moment. Therefore, investors are recommended to review and rebalance their portfolio if it is still in accordance with the current conditions.
If you have done a portfolio review and rebalance and still have funds that can be invested, it never hurts to start doing momentum investing. The decline in the stock market provides an opportunity for investors to build their portfolio.
Despite the worries, there are several sectors that tend to be defensive, such as the consumer and health sectors. Telecommunications companies are also projected to benefit from the high demand for data services, the impact of the government’s call to work and learn from home.
Even if seen in the long term, the stock market tends to rebound after an epidemic (epidemics tend to be more focused in certain areas than pandemics).