The year 2020 has been full of shocks and disruptions. The coronavirus pandemic has brought the entire world to a standstill and we still are grappling with the effects of the lockdown. Getting back to our normal routine seems almost impossible. But the challenge will only begin once we do try to return back to normal. Given the current scenario, the uncertainty of the market is at an all-time high. And Investallign Smart investment will guide you for smarter investments.
Many people have lost their jobs during the global economic meltdown. But how essential it is to get your finances in order and make investments to face the future? Investallign says it is extremely important! But how do you go about it? Is this the correct time to invest? Is investing at this time risky? We have tried our best to answer a few of your queries today.
Impact of Coronavirus Pandemic on the Investment market
Despite the coronavirus pandemic breaking out in December 2019, the world did not sit up and take notice till the beginning of this year. It was assumed that China would contain the spread and there wouldn’t be any risks to the global economy. With the spread of the virus to major countries like the USA, Italy, Iran, India, and many parts of Asia and Europe, the boom finally was heard in the month of February when many markets around the world crashed.
The U.S. stocks, European stocks, as well as Asian stocks, experience significant losses and downfalls. But on the brighter side, it wasn’t the worst stock market crashes in history. A major concern during this time was in March. when the oil price crashed in the month of March and major companies had to struggle financially leading to corporate defaults. With the number of cases on the rise and no cure in sight, there is great uncertainty in the market recovering.
The major concern here is not of the market recovering also. With widespread lock downs imposed and only partial mobility granted to various industries and companies, the market is currently in free-fall. The manufacturing sector has been hit hard by the virus, as well as the services industry. In terms of exports also the market has come to a standstill. Even the travel and tourism industry which boosts the GDP of many countries has completely been halted. We do not know if and when the market will recover, but it is all a waiting game.
Things to keep in mind when investing during a pandemic or during the crisis
- Don’t get trapped in trends – Avoid day-to-day panic when your goals are long term. So let your investments show long term returns.
- Buy from stable companies – Invest in companies that will sustain themselves during this pandemic as well as overcome the market crash in the coming few months or years.
- What should you look for in the company?
- Only invest in those companies whose products, industry, or business you understand.
- Never invest in companies you don’t understand.
- Moat entry barriers and competitive advantages should be researched.
- Best and safest proven instrument – During a pandemic Index Funds are ones which we can invest in, as they follow a passive investment strategy. These funds mimic the risk and return of the market on the theory that the market will outperform any single investment.
- Create a watch-list – An investor can create a watch-list of several trading instruments to make more informed decisions on investments. This list can help you track companies and stay up to date on financial news regarding them.
- Shares to invest in – Due to the declining cost of shares, many prices have fallen and it seems like a good time to invest. But those who are willing to should invest in either banking and pharmaceutical companies or FMCG which is fast moving consumer goods. Make this investment only if you have researched the market well
- Mutual Funds investment – Another place where you can invest is in Mutual Funds through Systematic Investment Plans. As the market is running at low points, right now is the correct time to invest in diversified equity funds as they cover many sectors. If and when the market recovers, the returns will be much higher.
- Government loans – At present, the government is also offering loans for small businesses and it is the perfect time to start your own as an entrepreneur. This falls under the MSME – micro, small and medium enterprise sector and is a recent government initiative to encourage local businesses.
- Business to invest in – The best place to invest right now is in the pharmaceutical sector because of the mass production of medicines and equipment being distributed by these companies. The other sector is banking and finance due to increased liquidity.
- Digital sector – The digital sector could also prove to be a good investment, as online education is proving to be a concept catching on. Technology has come in handy at present and provided us with something to fall back on.
- Liquid Funds – It is also better to invest in a liquid fund or fixed deposits where the risk is lower. In such investments, the funds are available to you at your disposal. Even PPFs are proving to be a smart option to fall back on. You can specifically focus on life insurance plans also, which are a long term investment and will provide returns over a period of many years.
Things you should avoid doing if you want the better result of your investments in a pandemic :
- Selling off the majority of your investments – The stock market has been extremely volatile in the past few months, which has provoked some people into selling off their long term investment. But it is essential to tide this difficult time over and focus on the long term plan. After a major setback like a pandemic, the markets will take around 12 months approximately to recover but as previous data, they always manage to get back on track.
- Purchasing a number of stocks – As much as you believe that investing in stocks is a great option right now because you could get them at a cheaper rate, it is extremely imprudent to throw away all your money into buying up an irresponsible number of stocks. The market will eventually recover, but at this rate, you could jeopardize your financial stability and not have enough money to cover your living expenses in case the company you invest in doesn’t recover.
- Not planning your expenditure – We are living in a pandemic that affected the world and things are certainly not normal right now. Not being mindful of what the future holds and spending on unnecessary things with a limited source of income will only cause you to exhaust your savings over a period of time. It is vital that at any point in time you do keep cash at hand for any emergencies or to help you get through at least a year of unemployment.
Pandemic or not, Investment is always a good option to earn some extra money and we at Investallign are the experts here. If you are still confused and need a real human to interact with rather than bots then we are here to help you. Get in touch with us and we will guide you throughout the process of your investment.