Investing in a time of Covid

Advice on investing during the ongoing Global Pandemic Crisis known as Coronavirus / Covid-19

The year 2020 is a year we will never forget. COVID-19 affected all of us in some way or another, some more than others. The financial stability of families and individuals was shaken, and the lack of a financial plan was brought to light. Suddenly, there was no income and no emergency savings to fall back on – In many cases around the world, reliance on state support was the only way to make ends meet.

We cannot dwell on the past, but we need to use the lessons we have learnt to try and build a better future and protect ourselves against unforeseen future calamities as individuals and a community at large.

Going forward, financial planning has become more important than ever. Saving and investing either to make up for what we have lost, or to weather future challenges going forward.

With this said, a good start to finding out where we are currently is to ask ourselves some vitally important questions regarding our financial position after COVID-19.

1.) In my current financial plan and path forward, will I be able to retire comfortably or even at all?

2.) If an emergency arose and I had to make a large capital payment- Would I be able to absorb that cost without having to take on additional debt or sacrificing my standard of living in a material way?

3.) If I had to lose my regular income today, how long would I be able to: meet my financial obligations and survive without taking on additional debt or relying on others?

These are three simple questions but have three very important answers which we need to reflect on.

If your answers to questions 1 and 2 are no, then the answer to question 3 is probably less than a month in most cases. This is a scary thought, and one that needs to be addressed.

There is some good news, by following the basic principles of saving and investing, you can change the answers to the three questions above.

1) Set Goals

Setting realistic and attainable goals is the first step when creating an investment plan. Retirement, saving for your children’s education, having an emergency fund, and saving for that dream holiday. Your goals should be prioritized accordingly, and by doing so, you would be able to implement a clear investment plan which could result in you achieving your financial goals.

2) Budgeting

Saving money and preparing for the future first requires reflecting on what is happening with your money today. How much disposable income do you have and what are you using it for right now? If you are living from pay cheque to pay cheque, is there a way you could tighten your belt to start saving in any way? Ultimately, we need to ascertain what our potential is to save and invest right now. The importance of securing our financial future is not how much we are saving, but rather when we are able to start!

3) In essence, it is never too early to start saving.

The power of compound growth means that the earlier you start saving, the more growth you will see accumulate and compounded on top of your growth. You do not need to start with hundreds of thousands of Rands, with time and sound investing, your hundreds can become thousands, and your thousands can become hundreds of thousands. Compound growth is a powerful and advantageous tool, and the sooner you start, the larger your overall growth will be. Feeding your savings little by little, can assist in substantial growth over time. The time is now to take the first step to financial peace of mind, no matter how big or small your initial investment may be.

4) Understanding risk vs reward

One of the fundamental principles of investing is, if one takes a less risky approach, it will result in a substantial lower return on one’s investment and the more risk you take, the better the chances are that you will make money, though an increased chance of losses as well. A key factor to understanding risk is to accept that risk is linked to time, the longer the investment term, the bigger the chance that your pro-risk assets can withstand the bearish down turns and benefit from the bullish up turns of the market. Over time your risk is vastly mitigated, but by not taking any risk, you could possibly be depriving your savings of growth and could very possibly experience losses in your investments and savings.

5) Inflation and interest rates.

Taking on no risk over a long term in many cases can be the riskiest strategy. Record low interest rates means that very low risk assets such as bank savings accounts and money market investments earn very little interest, which often do not beat inflation. They may be safe from capital losses but not from inflation. Over time inflation and the increased cost of living will reduce the spending power and value of your money. Low savings rates that do not beat inflation mean that your money is devaluing over time. In 2020, although global equity markets took a huge knock, they recovered strongly and gave positive growth.

6) Diversify your investments

Do not keep all your eggs in one basket- Diversifying your savings, opens your investment and savings to multiple avenues for growth, and helps you protect your savings should one of these avenues experience losses or under perform. Understanding asset classes and their inherent risks is important. There are many investment vehicles such as unit trusts, ETF’s, and structured products, managed by experienced investment and portfolio managers which will diversify the risks for you. These structures are multi-departmental such as investment research, financial advisory and intermediary and investment management and compliance to manage and mitigate risk on your behalf. A financial advisor can advise you on these limitless options available.

7) Seek professional help and assistance!

Proper financial planning and investing can be a daunting and scary prospect- However it is extremely Important to seek advice from an experienced and knowledgeable financial advisor. This could possibly make the biggest difference to your financial planning journey and may help you achieve the goals you desire. An experienced, ethical, and professional advisor can help teach you, guide you, advise you and go on the journey with you to achieving your financial goals.

The world as we know it has changed and we need to change with it. We need to adapt to the new normal ahead, no matter how uncertain it may be. By saving and investing, you may be able to create some certainty and peace of mind, knowing that your financial future and financial goals would be protected even through the toughest of times to secure your financial survival.

My name is Mohamed Naseem Nazeer, a financial advisor working remotely from Doha for a well- known company back in South Africa called Discovery. Please feel free to contact me for further information and assistance with investment. I assist clients with holistic financial planning, including assistance with healthcare, long-term insurance, and short-term insurance products. Please feel free to call me on +974 66348837 or WhatsApp me on +27836448777.

Start your journey today! It is never too late or early to start planning. Together we can ensure your financial wellbeing and secure your financial future.

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