Coronavirus’ Effect– What should an intelligent investor do?
Novel Coronavirus
(COVID – 19) has brought about an unprecedented situation before the whole
world. Leaders, policymakers, scientists and economists across the world have
numerous puzzles to solve before them. Best economies and stock markets across
the globe have taken a hard hit in the last few months. In light of this, what
should a Mutual Fund investor know and decide?
1. Economic slowdowns and crash in markets are normal and usual.
With any event, such as the COVID-19 pandemic, which effects the world at
large, it inevitably leads to a slowdown. However, this is just a phase.
2. This phase might last from 1 year to 3 years depending upon
the severity of the situation. Most world leaders including Donald Trump had
not considered the impact of the pandemic seriously for a long time. Hence,
nothing can be said with certainty about till when the slowdown will last as
its overall negative impact on the economy
is still merely a matter of economic prediction.
3. A long term equity
investor should not be worried about such a downward phase in the market.
Although, the situation seems extremely grim at the moment, those investors who
stay calm in these trying times win. In the last two decades, whenever there
has been a downturn in the stock markets (for eg. the 9/11 terrorist attack or
the 2008 financial crisis etc.), it was followed by a period of high growth and
boom of 2 to 5 years.
Markets cycle –
Investors who invested during the crisis have received the
following returns –
(Source – Economic
Times Magazine)
4. For an intelligent investor, the next few months is a great
time to make additional investments. When the
markets are low, an investor can purchase more units of Mutual Funds at lower
prices. These units are likely to yield better returns as compared with units
purchased when the markets are at their high point.
5. A SIP investor need
not worry about the economy and markets fallout at all. The very purpose of
investing through SIP is to ensure that an investor purchases units during all
cycles of the market. To reiterate, units purchased during this time will yield
good returns for an investor in the long term. The most important decision to take during these times
is to invest more and continue with your SIP investments. SIP installments made
when the markets are down earning investors the most.
6. However, the situation might be slightly problematic
for short term investors or for those who require
funds for completion of goal in the near future. Our advice for those investors
would be to systematically redeem your investments after consulting us in this
regard.
7. As Warren Buffett says:
“The stock market is a device of transferring money from the
impatient to the patient”. Thus, we implore our investors to be
patient in these testing times and stay invested. Patience is a virtue that
will help you make intelligent decisions.
To conclude, we would
advise for an equity mutual fund investor to be calm and patient in these
times. Secondly, consider this time as a good investment opportunity window and
you will be glad ten years down the line that you invested money right now.
We hope that you and
your family are doing well.
Bodh quotes
Please do contact your financial advisor in jaipur for any sort of investment or portfolio
related queries for these times. Our more than 27 years of experience in the
field will prove beneficial for your investment decisions.
Dr. Ramesh Maloo (Certified Financial Planner)
Founder of MalooInvestwise Pvt. Ltd.
Contact us for tax planning in jaipur
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