Stock Market –Dos during Coronavirus

Investors in the stock market have to venture out of their comfort zones if they are serious about wealth accumulation in the equity market in the current global turmoil. Basant Maheshwari, a veteran of the Dalal Street opined recently. In India alone, investors have lost over INR 50 lakh crore till date. It has been due to apprehensions due to the worldwide coronavirus pandemic, which has led to a drastic selloff in the value of the domestic equities.

There could be one of the following three scenarios according to Maheshwari.

1. There will be a cure for the pandemic in the near future, or

2. Countries worldwide will find a way to control the virus the way China did it, drop in new cases in France, the flattening of the curve in Iran, or

3. The worst scenario could be coronavirus spreading all over the world.

The stock market veteran feels that the best possible scenario could be the stock market going up in circuits. That is, the market would not stop until it goes to an all-time high peak. Also, there is a possibility of the market discounting the next couple of quarters. He also feels that even if the market faces a slowdown after corona, it will still rally.

Here are some of the tips or dos for the stock market investors to follow:

1. Make sure that their reserve fund is ready

If it is a question about deploying money, many investors hesitate to invest in an entire bear market. Although there is a recovery in the stock market, they get cold feet to resume their usual activities in the market. Only when there is a full recovery in the market do they realize their blunder. Thus, if investors prefer to be on the sidelines, they will be at a disadvantage when there is a recovery in the stock market. As such, investors should be ready to put their money to work fast. If they have adequate money to make a long-term investment, it is a good time to invest in the market now.

2. Investors should ensure of keeping an adequate buffer

Typically when the market is severely bearish, the economy is crippled drastically. Such states can create havoc on people’s finances. Delays in payouts, salary slashes, and retrenchments become inevitable when the economy experiences a downturn. So, prior to reshaping your portfolio, ensure that there is adequate buffer at your disposal.

3. Create a contingency fund

It is imperative to create contingency fund so that a minimum of six months’ expenses can be covered. It will ensure that you do not touch your savings kept for using post-retirement when there is a cash crunch. Experts are suggesting that if there are pending dues like credit card or personal loan payments to be maid, they should be cleared off prior to making investments.

4. It is better to stick to basics

Past experiences have shown that strong businesses typically manage to sail through even when times are bad. When companies are better run, they can handle disturbances like these and recover fast. Hence stick to investing in the equities of established business houses and avoid being adventurous.

March 28, 2020

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