Bear Market 101 – What Should Investors Do? | Covid-19 Investing

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As you are all aware, we are currently going through a great bear phase due to Covid-19. We sent emails to our clients on 6th, 12th & 19th March suggesting measures that need to be taken. Please go through those emails if you missed them. Now, let us look at where we are today.

 

Indian Markets have corrected ~30% YTD. Global Markets have also witnessed sharp correction.

 

Even the latest UN Report (read here) which says that India and China will be better positioned with respect to other economies going forward.

 

 

 

 

 

We are going through a phase of great volatility. This is something most of today’s investors would be very unfamiliar with. While the fall on March 23 was the sharpest ever in the history of Sensex, the daily movement of such magnitude is also not seen in a while.

 

Going forward, the market may correct another 10-20% or even higher. Someone famously said – only two people who know how to buy at low and sell at high, and these two people are the almighty God and a liar and the challenge is the fact that you don’t know how to speak to God and how to trust a liar.

 

source: Motilal Oswal Securities Limited

 

 

What Should Investors Do in the Current Scenario?

 

 

DO NOT PANIC – The most important thing is to not get carried away by headlines and make knee jerk reactions in panic. Do not convert notional losses into actual ones.
DO NOT STOP YOUR SIPs – The main reason we invest via SIPs is to use rupee-cost averaging to accumulate greater units in such market conditions. So unless you are facing grave troubles due to job loss etc. Please do not stop your SIPs, rather – Use this opportunity to top-up and increase your monthly SIPs.
MAKE LUMP SUM INVESTMENTS – As we have already mentioned before, this is a great time to do lump sum investments in Equity. However, one must make sure that one still maintains liquidity and one must stagger the lump sum amount in 3-4 tranches as no one can predict the exact bottom. In the long run, it is not going to matter whether you invested with Sensex at 25000 or 28000, but whether you invested at all.
REVIEW ASSET ALLOCATION – As exciting as the markets may seem to enter into equity, do not violate your asset allocation. If your pre-decided Asset Allocation has altered because of the market correction, use this opportunity to re-balance it! If you have been investing without keeping in mind asset allocation, use this opportunity to start and become a better, more disciplined investor.

 

Always remember, correct asset allocation is the key TOWARDS A SECURE FUTURE.

Remember that volatility is part of the game and as a long-term investor you just need to be disciplined and ride it out.  If you have any questions or concerns regarding what you should or shouldn’t be doing, do get in touch with us!
Stay home and Stay safe.