By Pankaj K Agarwal

In these challenging times, taking care of your financial well-being comes very close to your physical and mental health. Even as the world worries about the loss of precious life due to pandemic, the investing community worries about losses their portfolios seem to be making. Worry doesn’t help, however. What might help investors tide over the current crisis is some rationality and some caution. Let us see how we can observe investment hygiene to prevent and minimise harm.

Emergency funds
If you fear loss of job/income post Covid-19, see if you have an emergency fund equal to 6-12 months of your monthly expenses. Do it now if you don’t. It is the financial equivalent of N95 masks. Park this money in a bank fixed deposit. Do not forget to cap your FD at Rs 5 lakh per bank. Also check if your personal health insurance policy is alive.
Portfolio distancing

Watching your portfolio every hour is counter-productive, especially, your equities. Remember the basic purpose of equity investing? Yes, equities are for long term. Period! Even though this crisis is the mother of all, in the past equities have bounced back crisis after crisis. Thoughts of liquidating your equity portfolio now will only convert paper losses into real ones. Consider Charlie Munger’s recent advice: “Do Nothing”. If you have an over 5-year horizon for a financial goal, actually this is a great time to invest in equity. However, if you are close to retirement and likely to need the money in two-three years, exiting may not be a bad idea.

Portfolio sanitisation
Use various portfolio tools available on reputed financial websites. Diagnose what may be wrong and sanitise. See if you are well-diversified. Next, take a particularly close look at your debt fund holdings. True, RBI and mutual fund industry have weathered the storm caused by Franklin Templeton’s decision and the panic has been checked for now. Nonetheless, cash flow problems leading to reduced debt service ability cannot be ruled out for many companies due to demand impairment post Covid-19. Therefore, if you find your debt fund has a large corpus invested in AA and lower paper, you may consider switching to overnight/liquid funds or bank fixed deposits.

Boosting emotional immunity
Ben Graham once said that the chief enemy of the investor is himself. In falling markets, emotions run high. A knee-jerk (mis)step arising out of fear or greed may irreparably damage your portfolio. Often, such overreaction is caused by lack of an alternate perspective and inadequate knowledge. Counter it by boosting your emotional immunity. Get wiser about investments and finances. A number of great minds in investing are speaking in free webinars nowadays. Listen to them. Ask questions. Compare and contrast advice. Try to stay rational.

One of the best tools to prevent infection from Covid-19 is personal hygiene. Likewise, investment hygiene can go a long way in protecting you from avoidable financial damage.

The writer is professor of finance, IMS Ghaziabad. (Views are personal)