4 Investment Lessons to Learn from the Coronavirus Crisis
All of us are going through an extremely tough time this year.
The health crisis cast an adverse impact on economy, with crashing stock market and companies laying off employees or subjecting them to pay cuts.
A large-scale crisis like this causes fear and uncertainty and being pessimistic is quite obvious.
This situation is bound to give you sleepless nights, especially if you are new to investment sector, experiencing the first major financial crisis.
Though this pandemic is unique, we have undergone several crises in the 20th century like world wars, financial market collapse and political and social tensions. However, we always find ways to invent, adapt and transform and bounce back from the hard times.
On a positive note, every adversity throws in some opportunities.
And yes, coronavirus is not different either.
It is a teacher, giving us important financial lessons that can help us in the long run.
Let us find out what financial lessons we can take from this pandemic.
Decide on Goals before Investing
The investors emphasise investing according to your goals.
However, most investors are ignorant about it.
If you are investing just for the sake of investing, you are bound to panic with the markets crashing from the beginning of this year.
So, decide on goals and make investments accordingly.
Avoid Investing in Equity for Short-Term Goals
This is an extension of the previous point.
People investing in equities are losing a lot of money.
You can avoid this if you aim for longer period.
Invest in equities only if your goal is more than five to six years away.
If you have short-term goals, opt for bank deposits and debt funds.
Wait for the Tide to Turn Again
It is said, only make an investment that you can happily hold on to even if the market remains shut for ten years.
Say, for example you were happily invested when this pandemic hit. After the pandemic hits, the market slows down.
It will rise up once again.
Hold on your investments and avoid selling them off.
If you are following a robust strategy and have made quality investments, be brave enough to weather out the storm.
Do not get carried away by sentiments or liquidate investments at a loss.
That way, you will probably never get the opportunity to recover your hard-earned money.
Identify Opportunity in Crisis
Well, staying invested and dealing with the storm of this pandemic is something and the ability to adjust to new opportunities is something else.
Remember that opportunities will not be here forever.
Think before you take the plunge.
Stick to index stocks and sectoral leaders.
Be on the lookout for businesses which are non-cyclical in nature, enjoy higher flow of cash, have low debt and come with an experienced and strong management team.
You can also consider the debt oriented mutual funds. These are perfect for near-term investment, offers excellent liquidity and are tax-efficient.
Most of us take life for granted and enter out comfort zones. But this pandemic teaches us the need to work harder and stresses the need to have an alternate source of income. You can have this through freelancing, part-time jobs, renting out property, etc.