Coronavirus (COVID-19) is killing the stock market. Stocks are falling every day. There is complete lockdown at many places and many businesses are going through a tough time. There is fear in the minds of investors and its really very painful for anyone to see the portfolio value going down every day.
What should you do now?
This is not the first market crash it has happened many times in 2008, in 1992, in 2000 and before also. After every such crash, the market has recovered every time and it made new highs every time and it will recover with this coronavirus tragedy also at some point of time in the future. You have to believe that the world is not going to end.
What about the portfolio?
There are 3 categories of investors in the current situation
- Fully invested, cant invest more
- 50-70% invested can invest more
- New investor or 10-20% invested
The strategy in the current situation should be according to the category you belong to. If you fall in the first category, it’s a tough time for you and you should take rational decisions. Since you don’t have new cash to deploy you can arrange some cash by selling the bad stocks of your portfolio.
Coronavirus is going to affect the businesses of many companies. High debt company capital intensive low-profit margin companies can be removed as they might be permanently impacted. You can sell the stressed balance sheet companies and use this cash to invest in the quality companies.
If you fall into the 2nd category, you also can review your portfolio. Don’t be in a hurry to invest. Wait for the corona tragedy to normalize. Wait for the lockdown to end. Wait for the downtrend to begin in the coronavirus cases. Once things are normal you can start deploying your cash.
If you fall into the 3rd category you are very very lucky. This is a golden opportunity for you to make great returns, don’t miss it. You can start deploying your capital in small chunks of 10%. Don’t invest more than 50%. Only after the corona starts to vanish you can deploy the other half of your capital.
Over to You
Crashes have come and gone, and only the most patient investors have created wealth. This is probably a golden opportunity for you to invest in such a fear.
Once the Coronavirus (COVID-19) is gone, a multi-year bull run of Indian stock market will start; and you will only thank yourself for investing in bad times and being patient.
If you would like to learn technical and fundamental analysis during this quarantine and lockdown, visit our InvestorJi Academy and get started with it. As a bonus, you will get a list of 5 best quality stocks to invest in which can give around 50 to 300% returns in less than a year.
Abhishek is an Engineer MBA in Finance and Certified Research Analyst. He is an active trader and investor in the stock market since 2010. Follower of the philosophies of Warren Buffet and Peter Lynch in investing and trend following in trading.