Coronavirus outbreak has left common investors worried over how they can protect their wealth and invest.
Coronavirus outbreak has left common investors worried over how they can protect their wealth and invest. What could be the smart strategy to pursue in current uncertain times when a deadly virus has wreaked havoc on the stock markets across the world and killed thousands of people, including three in India till today. FE Online talked to several experts to find an answer to this question. Here are the edited excerpts on what they said:
Be greedy when others are fearful?
Rachit Chawla founder and CEO Finway: The current situation with the world getting hit by Novel Coronavirus has unfortunately worsened condition of global economy. Our country was already at its all time low economic growth. But tomorrow will always be better than today, in times to come everything is bound to get settled and economy will continue to grow. The smart strategy currently will be to do long term investments by taking a little bit of risk. Because in the long run it will pay off. Be greedy when others are fearful.
Archit Gupta, Founder and CEO, ClearTax: The markets may not seem favourable now. But the investors should not make decisions in haste. To beat market volatility, the best thing an investor can do is to stay invested over the long term. Equity-linked investments are known to offer excellent returns when one stays invested for more than five years. One may enjoy high returns on short-term equity investments, but it may not work every time, and the current market scenario is the best example of this.
Harsh Jain, Co-founder, and COO, Groww: The current coronavirus situation has made a lot of investors uncertain about the future of their investments and personal finances. They can follow some quick strategies:
Invest with a long-term horizon: Markets have recovered from worse situations in the past and they will recover from this crash too. However, the severity of the situation determines the time it can take for recovery. Hence, long-term investment strategy works.
Invest slowly but steadily: Systematic Investment Plans (SIPs) are good tools to use during such times. Choose securities with strong fundamentals and start a SIP. Over time, you will benefit from Rupee Cost Averaging and as the market recovers, and stand to gain handsome returns.
Avoid emotion-driven decisions: It is natural for people to panic given the possible impact of the virus on economies around the globe. However, panicking and selling can only lead to losses since markets are down. However, holding on to good investments can offer an opportunity to earn good returns.
Don’t try to time the market: Some investors might be considering investing a lump sum into the markets since they are down. While theoretically, this might be a good idea, the impact of a situation like an epidemic cannot be predicted. If it aggravates, then the recovery might take longer meaning your funds will be stuck for an extended period of time. Investing via the SIP mode can free you from timing the markets. Another way is to go the Systematic transfer plan route where you can invest a lump sum amount in liquid funds and then periodically start diverting these funds in an equity fund systematically.
Follow equity underweight strategy?
Sousthav Chakrabarty, CEO, and Director, Capital Quotient: Equity underweight strategy is something we recommend during this time. What the underweight strategy entails is to essentially move out 50 per cent of portfolio into a basket of conservative debt securities delivering around 9 to 10 per cent returns per annum, preferably on a monthly or quarterly basis. And, the idea is that we use the proceeds from the debt investments to buy equity on a systematic basis every month, mainly in Nifty and depending on the predetermined degree of correction, move this money back from debt to equity at a later point of time.