Photo: Bloomberg
Photo: Bloomberg

How to counter the coronavirus threat to your financial health

  • It may have short-term effects on your investments, spending and travel, but don’t make hasty decisions
  • Focusing on long-term goals will ensure that you don’t get unnerved and stray from your financial plan

The coronavirus is spreading fast. What started from a single city, Wuhan in China, has now turned into a pandemic and has spread across at least 25 countries, infecting over 40,000 people (the majority of them from China) and leading to the death of nearly 1,000 people, according to various media reports. As the world gears up to deal with the situation, which can prove to be deadly in some cases, you would also need to assess the likely impact on your financial life.

The maximum impact will, of course, be on China, but other countries are not immune to it because most economies are now globally integrated. Moreover, any slowdown in China, which is the world’s second biggest economy and accounts for close to 16% of the global GDP (gross domestic product), is also likely to impact other economies, including India, which imports various goods from China. Various economic activities in China have taken a hit. Offices, factories, schools and other establishments are being shut across the country, as more and more people get quarantined to contain the spread of the virus. Travel to and from China has also been restricted.

Such outbreaks are not uncommon—there was SARS in 2002-2003, Nipah in 2018 and Ebola in 2014-2016. So it makes sense to keep certain ground rules in mind. We give you a low-down on how a pandemic like coronavirus can affect your financial health and what you can do about it.

Do's and don'ts to keep in mind
Do's and don'ts to keep in mind

Impact on investments

Financial planners said some of their clients are getting anxious about the likely impact of the coronavirus outbreak on the stock market and asking how they should deal with it? Should they exit some of their equity investments and invest later when the markets tank?

So far, the reaction of global equity markets, including Indian markets, has been limited, but experts said it could lead to a disruption in economic activities due to supply side constraints, which will result in market volatility.

“Concerns regarding the impact of coronavirus are very real, though the equity markets are brushing it off due to sloshing liquidity. Any disruption in Chinese economic activities would have a lasting and larger impact on global economic growth," said Pankaj Bobade, fundamental research head, Axis Securities Ltd.

“The equity markets driven by positive earnings growth outlook would get a rude shock in case of limited or contracting economic activities due to disruption in supply chains from China," he added.

Due to the fear and uncertainty in the markets about the scale and impact of the virus outbreak, gold prices have seen a rally as the commodity is considered a safe haven. But should you increase your allocation to gold? Experts said that such short-term events shouldn’t make you change the allocation to investments which are meant to achieve long-term goals.

What to do: “Investing in equities is advisable for the long term. Focusing on long-term goal with a risk-adjusted approach will ensure that such events do not unnerve you. If you had invested in a diversified equity fund, the manager would have pared down his exposure to sectors and companies that could be negatively impacted by events such as the coronavirus outbreak," said Lovaii Navlakhi,managing director and CEO, International Money Matters Pvt. Ltd, a financial planning firm. Though you must stay on course for your long-term goals, it is during such times that an emergency fund comes handy.

“We are advising people not to worry and tinker with their long-term investments. The best way to deal with it is to have adequate emergency funds. As we have seen there have been situations like lockdown, they may also plan to keep some part of the emergency fund in cash in case the situation worsens, " said Vishal Dhawan, founder, Plan Ahead Wealth Advisors, a financial planning firm.

Impact on investments

Financial planners said some of their clients are getting anxious about the likely impact of the coronavirus outbreak on the stock market and asking how they should deal with it? Should they exit some of their equity investments and invest later when the markets tank?

So far, the reaction of global equity markets, including Indian markets, has been limited, but experts said it could lead to a disruption in economic activities due to supply side constraints, which will result in market volatility.

“Concerns regarding the impact of coronavirus are very real, though the equity markets are brushing it off due to sloshing liquidity. Any disruption in Chinese economic activities would have a lasting and larger impact on global economic growth," said Pankaj Bobade, fundamental research head, Axis Securities Ltd.

“The equity markets driven by positive earnings growth outlook would get a rude shock in case of limited or contracting economic activities due to disruption in supply chains from China," he added.

Due to the fear and uncertainty in the markets about the scale and impact of the virus outbreak, gold prices have seen a rally as the commodity is considered a safe haven. But should you increase your allocation to gold? Experts said that such short-term events shouldn’t make you change the allocation to investments which are meant to achieve long-term goals.

What to do: “Investing in equities is advisable for the long term. Focusing on long-term goal with a risk-adjusted approach will ensure that such events do not unnerve you. If you had invested in a diversified equity fund, the manager would have pared down his exposure to sectors and companies that could be negatively impacted by events such as the coronavirus outbreak," said Lovaii Navlakhi,managing director and CEO, International Money Matters Pvt. Ltd, a financial planning firm. Though you must stay on course for your long-term goals, it is during such times that an emergency fund comes handy.

“We are advising people not to worry and tinker with their long-term investments. The best way to deal with it is to have adequate emergency funds. As we have seen there have been situations like lockdown, they may also plan to keep some part of the emergency fund in cash in case the situation worsens, " said Vishal Dhawan, founder, Plan Ahead Wealth Advisors, a financial planning firm.

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