It's high time to review insurance cover against liability

Never been in human history did the governments go to a voluntary production cuts and thus the pandemic-related shutdowns are an unprecedented move. The priority of public health over economic health has slowly begun to unravel its side effects. Now, the governments across the world are grappling with several issues on how to restart the economy, while a perfect cure is not in sight or a preventive vaccine is available. The predicament is augmented due to the already strained public finances across the nations.

'Be fearful when others are greedy and greedy when others are fearful' was what he preached and behaved always. This was evident during the last crisis of 2008, when he lined up his war chest to acquire sizable proportions in marquee brands and corporates to generate value to himself and his shareholders. That only enhanced his legacy as the foremost and greatest value investors of all time. But this time as the markets crashed and prices corrected across many corporates creating an atmosphere of fear, he has not exhibited the streak of greediness he's known for.

No, it doesn't mean that he wouldn't be taking any further positions or would move away from equity, but it represents the uncertainty in the entire situation. This kind of inertia in economic activity was not observed even during the world wars of the previous century.

The ill-effects of the drag in the economic activity is slowly beginning to unfold in terms of the domino effect. We're observing a slew of corporates in the US filing for bankruptcy in the last few days and we may see a repeat of the Great Financial Crisis (GFC) of 2008. In anticipation or to avoid such a scenario, the global central banks have launched coordinated monetary policies while the governments (unlike reactionary measure last time) have proactively announced fiscal stimuli. This has unleashed huge liquidity infusion into the financial system across the world and could help prevent further damage.

Investing is not binary i.e. zero or one in equity or any other asset class. It's all about risk management and asset allocation is the key to achieve it. Much before that one needs to be have certain precautions and it's also important to stick to the long-term goals. To tackle such situations as now, one has to be clear about their liquidity conditions or have an understanding about their possible liquidity requirements. The provision for emergency fund is necessary.

It is also argued that Warren Buffet might be provisioning some of these requirements arising or would arise out of the insurance losses and hence has not exhibited the streak of greediness he generally is associated with. So, it's important to have a right amount of provision for emergency fund.

On a personal level, one has to review the insurance cover against the liability and enhance if required. This is critical than ever due to the pandemic situation. Also, one has to continue to have an eye over the long-term goals of children's education and/or retirement. The volatility in equity markets shouldn't alter the allocation to equity in such long-term goals. Also, don't hurry to pre-close the housing loans particularly by redeeming from the existing

portfolio and emergency funds. Ideally, one should avoid from taking additional commitments of real estate, yet. More importantly, please eat healthy, stay safe and follow instructions of the authorities to avoid any danger.

(The author is a co-founder of "Wealocity", a wealth management firm and could be reached at knk@wealocity.com)