Most of us move through our days submerged in routines, juggling everyday responsibilities. Every now and then, we come up for air, a brief pause to disconnect and reset. But that’s getting harder.
Even these moments are now crowded with conversations about war, fragile markets and the growing impact of artificial intelligence on jobs. The anxiety lingers, spilling into conversations with people dealing with layoffs or market losses.
You can’t control the noise. But dwelling on it only adds to the stress, especially if you’re not taking steps to protect your finances.
To help you tighten your financial seatbelt, Mint Money spoke to experts and asked five pointed questions:
Here’s what experts say
Gajendra Kothari, co-founder, Etica Wealth
- What risks should people proactively prepare for this year—and how
Given the current environment of heightened geopolitical risks, coupled with artificial intelligence (AI)-led disruption, investors should be prepared for the possibility that equity markets may deliver negative returns this calendar year. The last time markets posted a negative annual return was in 2015 (-5%). While markets have remained largely flat over the past 18 months, they could stay at similar levels for another year.
- If you’re reviewing your portfolio today, what changes should you consider
Do nothing. Continue with your systematic investment plans (SIPs). If markets fall by 10%, consider adding a lump sum. Maintain around 10–15% as dry powder in liquid funds. Markets throw up opportunities from time to time, and in a flat market, having liquidity helps in topping up during short-term corrections.
- How much cash is enough? Does the six-month emergency rule still hold?
Maintain a minimum of 12 months of expenses in liquid funds. Six months may be too risky, particularly if only one spouse is earning. If both spouses are working, six months’ expenses could be the minimum threshold.
- What should you do about loans—existing ones and new commitments?
Continue servicing existing loans, as interest rates are not very high. For new loans, ensure a healthy income-to-loan ratio to avoid strain from higher cash outflows.
- What are the biggest mistakes households are most vulnerable to right now?
The biggest disruption is likely to be on the jobs and business front. Post-Covid, uncertainty has increased significantly. Households should maintain a strong buffer in emergency or short-term funds to ensure near-term goals are not disrupted.
- And for those who began their equity journey recently, if their portfolio is in the red, what should they do?
For recent equity investors, do nothing. Equities are inherently volatile and should be approached with a minimum investment horizon of five years. Markets saw a strong run from March 2020 to September 2024, and some moderation is likely. Investors should temper expectations to returns of around 10-12% over the next three to four years.
Dilshad Billimoria, certified financial planner, and managing director, and principal officer, Dilzer Consultants
- What risks should people proactively prepare for this year—and how
This year, households must ensure they have adequate buffers for emergencies. Emergency funds covering medical contingencies, job loss, sabbaticals and career breaks are essential. Adequate health insurance is equally critical to keep pace with rising medical inflation.
- If you’re reviewing your portfolio today, what changes should you consider
If your asset allocation is already aligned to your risk profile, time horizon and goals, there is no need for changes. Given geopolitical tensions, any fresh allocations or rebalancing should be done in a staggered manner. Portfolios should continue to focus on large-cap, Nifty 50 and flexi-cap exposures.
- How much cash is enough? Does the six-month emergency rule still hold?
If both spouses are working, maintain six months of emergency funds. If only one is earning, this should be extended to 12 months. For single, divorced or widowed women, a 12-month buffer is essential. Emergency funds can be held across sweep-in bank accounts, liquid funds and arbitrage funds.
- What should you do about loans—existing ones and new commitments?
Loans should be managed based on the debt-to-income ratio. If this is within 30–35%, EMIs can continue as planned. If higher, consider prepaying or restructuring loans. Prioritise closing high-cost debt such as credit card loans.
- What are the biggest mistakes households are most vulnerable to right now?
Younger households are increasingly relying on credit and spending without building sufficient reserves or allocating adequately to investments. Unlike previous generations, they have higher incomes but must exercise greater discipline in building long-term wealth.
- And for those who began their equity journey recently, if their portfolio is in the red, what should they do?
There is no need to panic during market downturns. As long as company fundamentals remain intact, investors should stay aligned to their investment mandate and advisor recommendations.
Shyam Sekar, founder, ithought PMS
- What risks should people proactively prepare for this year—and how
Investors should prepare for a year marked by potential inflation spikes and volatile commodity prices. Portfolios should be built around businesses that can pass on cost pressures to customers, while maintaining a balanced asset mix to manage volatility.
- If you’re reviewing your portfolio today, what changes should you consider
Exposure to highly valued businesses or themes should be reduced, with portfolios aligned more closely to sound valuation metrics. This can help cushion against sharp corrections if broader sentiment weakens.
- How much cash is enough? Does the six-month emergency rule still hold?
Maintaining liquidity is critical. In the current environment, holding 18-24 months of expenses can provide meaningful financial stability. Adequate reserves offer both security and the ability to respond effectively in a crisis.
- What should you do about loans—existing ones and new commitments?
Households should keep overall debt levels low. Accelerated repayment such as paying an additional 10% of outstanding loans annually alongside regular EMIs can significantly reduce tenure. Avoid top-ups on home loans, new consumer debt or fresh personal loans.
- What are the biggest mistakes households are most vulnerable to right now?
Buying homes purely due to low booking amounts, borrowing for consumption, or taking loans against portfolios for speculative purposes are practices to avoid.
- And for those who began their equity journey recently, if their portfolio is in the red, what should they do?
Investors should review portfolios with an expert, seek a second opinion where needed, and understand the drivers of any decline. If corrective action is required, it should be taken in a timely manner.
Dhirendra Kumar, founder and chief executive, Value Research
- What risks should people proactively prepare for this year—and how
The real risk isn’t oil or war, it’s investor panic. Data from Carson Group, which studied 40 major geopolitical events over 85 years, shows that average market returns six months later were positive. The damage typically comes not from the event, but from selling into it.
- If you’re reviewing your portfolio today, what changes should you consider
If your portfolio requires restructuring because of current headlines, it was likely misaligned to begin with. Fresh investments should continue as planned—into existing SIPs, with the same funds, amounts and timelines.
- How much cash is enough? Does the six-month emergency rule still hold?
A six-month emergency fund remains adequate. These reserves are meant for personal contingencies such as job loss or medical emergencies—not geopolitical uncertainty. Avoid confusing global anxiety with the need to hoard cash.
- What should you do about loans—existing ones and new commitments?
If you need a home and can comfortably service the EMI, proceed. Large loans are life decisions, not market-timing calls. For existing loans, continue as planned and avoid aggressive prepayment if it comes at the cost of long-term equity investments.
- What are the biggest mistakes households are most vulnerable to right now?
Investors may feel tempted to panic-sell, stop SIPs or shift to gold and fixed deposits amid negative news. All three impulses should be resisted. Equally, avoid anyone claiming certainty about market direction.
- And for those who began their equity journey recently, if their portfolio is in the red, what should they do?
Equity portfolios will periodically turn negative. That volatility is the price of long-term wealth creation. If this is unsettling, expectations—not portfolios—need adjusting.