Everyone remembers the nursery rhyme, ‘Jack and Jill’, but this time it’s not Jack, it’s the market that has fallen down and broken every investor’s crown. Even without testing positive, most people are experiencing shivers from the pandemic called ‘corona virus’ also known as Covid-19. More than fear of the pandemic, it’s the pandemic of fear causing more jitters in the market, making a hole in every investor’s wallet. No one in their wildest dreams must have thought that a micro-organism would trigger a global financial massacre.
Investor sentiments have taken a hit as there is currently no solution in sight for the disease and this could lead to disruption in businesses and thus, short term earnings will take a beating. With the lockdown and social distancing mandate, people are unable to travel, which is affecting the tourism, aviation and hotel industries; malls and theatres are closed, which affects the entertainment industry; construction and any other industry which requires physical presence at work has come to a standstill; in fact, despite attempts to work from home, most businesses are being impacted and this will result in a slowdown in the economy.
How bad it could get and how long it will last, no one can say.
During the previous disease outbreaks, markets fell drastically, but also recovered quickly. During that time, market volatility provided a good investment opportunity and the table below shows why.
During such grave situations in the market, investors tend to become restless and start selling off their investments, booking losses. As a long term investor you should control your emotions and currently this is not a time to sell or stop your SIP, unless of course you need the funds for your goals or sustenance. Stop your SIPs only if you have a drop in your income; if not, continue with your SIPs. Selling means you are making a loss and giving others an opportunity to buy cheap.
Similarly, if you stop a running SIP, you are preventing yourself from taking advantage of rupee cost averaging. For those who have financial goals and have started SIPs to achieve these, it is better to avoid the negativity surrounding the market and continue on the path of investing, in order to achieve their goals.
Those investors who seek to maximize their investments through lump sum investing should follow a disciplined approach and an investment strategy, i.e. through STP (Systematic Transfer Plans) spanning the investment as per the equity market movements. The current market is not one in which investors should attempt to invest at one shot.
Markets are facing a historical correction so one has to control their emotions and always have your asset allocation in sight so that you don’t make investment decision haphazardly and face the repercussions in future. Stay safe!
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