It's March 2020 We (the World) are in the midst of the Corona Virus Pandemic.......
There are more than enough articles, videos and the ever
present whatsapp opinions on the virus situation gripping our lives today. Most of what is said or written last week is
already irrelevant because of the
situation evolving on an hourly basis.
Without adding more gyan on this subject I am giving below
some thoughts that are pertinent to our investments.
Unless this is the end of the world as we know it - This
situation will pass like all situations affecting our financial lives in the
past. If it is indeed the end of the
world then our investments won't matter.
Since the situation as it is, has no precedent it is
impossible to give a time line to the return to some sense of normalcy. The reaction we are seeing now is panic and
fear of the virus itself. The after
effects on the financial health of businesses and balance sheet numbers cannot
be estimated - and it is this that will further impact stock prices and our
portfolios in the coming months.
To understand the
scale of a downturn lets visit the 2008 Financial crisis -
At that time the
Sensex plummeted from 20812 (Jan 2008) to 8451 (Nov 2008) 10 months a drop of 60% (presently we are down 30%). It remained around those levels for 6 months
till March 2009 and regained 20000 in Oct 2010 (The comeback
took 18 Months)
I'm daring to make a
comparison with 2008 only because we were all investing at that time too. The situation then was Financial
mismanagement in the US our markets were affected only because of the
size of their investments here. Today
the situation is Medical and Global without any positive news on the horizon so
we cannot really compare the two situations.
I propose the following:
1) Ensure that you have enough cash flow to run your life and
home for the next 12 to 18 months. Hopefully this can be met without touching
your investments in the Equity markets (through Mutual Funds).
2)If you are
investing any amount monthly (through the SIP route) let that continue as you
are accumulating more with every drop in the markets. Let
those monthly investments continue
If you can
allocate a little more on a monthly basis this is the time to start considering
3) Do not withdraw more than you need for living expenses
from your existing investments. The loss
you are seeing in your portfolio 'on screen' is temporary. If you withdraw now that loss will be permanent.
Once the Governments are done with tacking the health issue
that is staring in our faces now, they are bound to give assistance to revive
the markets as is already being seen with The US Federal Reserve, The Bank of
England and our own Reserve Bank of India.
At present of more importance is to take all precautions to
stay healthy.
Best Wishes.
Michael Duarte (March 2020)
