Investment Options During the Covid-19 Pandemic Lockdown

Do you know what a Black Swan event is? No, it has nothing to do with the movie Black Swan. What it really refers to is a situation that is unpredictable and improbable, but which bursts in our face suddenly. This pandemic is a Black Swan event as well. No one knew it would be happening. No one could prepare for it nor anticipate it. Even now, there is a ton of confusion regarding its effect on the economy. The world cannot yet figure out how to revive the economy.

Today, almost all countries are affected by this pandemic, although the spread is not the same everywhere. Strangely, the spread is maximum in many First World countries like the USA and the UK. Economies around the world are likewise shut down, but with varying degrees. Due to this state of affairs, businesses and economies are affected badly. Many industry segments are not able to function any more, like shopping malls, hotels, theaters, manufacturing and production centers, and e-commerce stores.

What is the financial impact of this lockdown?

Businesses are shutting down, and are unable to pay salaries to their employees. Customers who had taken loans find themselves unable to pay loans back. There is rampant job loss and unemployment, and these problems are only increasing. The economy can face a domino effect as loan services will be taking a direct hit. If this happens, fixed income will get affected as well. Debt papers of all kinds shall be affected if this happens, and shall be followed by rating downgrades. Those who hold debt papers shall not receive principal and interest. As you can see, banks shall be affected by these trends. 

These things happen when businesses are not able to continue operating in such conditions in the long run, and have no one to help them. However, governments do intervene to help, because governments do not wish to see massive job losses and a complete downslide of the economy. With the government helping, all is not as bad as it seems.

However, at an individual level, it is still important to evaluate your financial situation, such as your investments. The important thing in this situation is capital protection and the importance of regular payments. In this article, we are going to discuss some investment avenues that are appealing due to their safety and low-risk nature.

Remember, these debt instruments are issued by the government or by their associated bodies like the PSUs. These carry low-risk and in such financial situations, these are safe haven investments. Here are some of them:

Bharat Bond Fund

This is an AAA-rated investment option, and therefore is quite safe. Bharat Bond Fund tracks the Nifty index. It has low charges and is a passive fund. There are two investment options here: 3-year and 10-year options. The post-tax returns are expected to be higher than most other debt investment options. The fund has the added benefit of being liquid.

Government security funds

These funds are MF schemes and have government securities as underlying instruments of investment. Due to this feature, these funds are risk-free. These funds are actively managed and are held till maturity. The funds have a long tenure and come with the added benefit of liquidity.

Banking and PSU Debt Funds

These schemes are safe because these are debt MF with the underlying being PSU debt papers and banking documents. One of the greatest benefits here is that these are ideal for short-term investments. There shall be minimal fluctuation in interest rate as well.

To Conclude

These are some instruments that you can invest in during this time of economic turmoil. As you can see, these are very safe for investing in, and can give benefits whether for the short term, or for the long term.