Phase One Corona Lessons
- May 21, 2020
- 2 min read
The impact of Coronavirus is likely to unfold and reveal many insights over time. We thought it might be helpful to highlight 3 key financial take outs from the initial phase that resonate with our philosophy and values.
Diversify your investments
Diversifying your investments means spreading your money across various assets classes as well as within those asset sectors to lower your investment risk. If one investment performs poorly over a certain period, others may perform better over the same period, thereby reducing the potential for increased loss. Covid-19 is a black swan event (a black swan event is a metaphor that describes an event that comes as a surprise and has severe consequences). Many asset classes have performed poorly at this time, however there are also sectors and assets outperforming. Investment diversification is not something to be taken lightly. Investments should always form part of a considered plan, understanding the advantages and disadvantages of each asset class.
Save for a Rainy Day
It has been sunny for so long that many have forgotten to save for a rainy day.
Aim to have a minimum of 6 months of expenses in cash reserves. This should cover the essentials such as rent/mortgage, food, electricity and fuel.
Once you work out what this amount is (its different for everyone) – put it in a high interest earning account and do not touch it. If you lose your job or we experience another black swan event in future, you know you can financially survive for a set period of time. Additional savings for other goals such as holidays, a new car etc sit outside of your emergency buffer. These are only for a rainy day.
Retirees should have a higher level of cash reserves to allow other investments time to recover.
The simple life
If Covid-19 has really taught us anything I believe we are clear on who and what are important to us. We have not been able to see family or friends, travel, eat out, go to the gym, etc. We have been forced to slow down, stay at home and lead a simple life. Many have had to readjust budgets and get back to the bare basics. Others have not had to do so yet, but may need to adjust in future. Know where you can save and save a little extra. Slow down your pace and take time to enjoy life’s simple pleasures.
Stay safe and well.
While all care has been taken in the preparation of this material, no warranty is given in respect of the information provided and accordingly neither Tanya Carlson, GPS Wealth Ltd nor its related entities, employees or agents shall be liable on any ground whatsoever with respect to decisions or actions taken as a result of you acting upon such information
