A “Must Read” for all those who are worried about their investments during Corona Crisis
Last Updated on October 1, 2020 by Chitale CFS Pvt Ltd
Everyone around us is talking about just one thing which is dominating every conversation right now and that is Corona Virus! It has not only impacted the health of an individual but also left footprints on financial market.
Where we are going?
Seeing your portfolio down by 30% from its peak is painful but sadly it is very difficult to predict the market at this point of corona times; any good news will trigger a recovery while bad news will further push the curve down!
The most significant thing to remember during such hard times is, as the market keeps altering during bad phases, at some point of time the investors will no longer react to further bad news.
Smart investors usually keep low expectations during such crisis so he or she tries to move things not from bad to good but from bad to less bad.
Some investors feel that they have lost a big chunk of profits during such disaster in financial market but wait a minute, you haven’t lost anything yet! These losses are hypothetical; they are just numbers, right? The moment we sell, they become actual losses! We have witnessed a sharp recovery in financial markets after every financial catastrophe, so the best thing that we can do right now is to sit back and relax.
Should I stop my SIP?
It may seem sensible to exit and wait for lower levels to enter back in market, but believe us that’s the worst thing you can do right now and you may destroy your persistently built portfolio with this premature decision. Just imagine the losses you might incur in case you are not able to re-enter at the lower level, the market recovers so fast that the cost of missing the recovery would be huge!
It is not surprising that markets reacted in a similar way to Ebola, Nipah, SARS, Zika and all similar epidemics. The market corrected sharply every time we saw such turbulence but we can’t ignore the fact that the market recovered aggressively as soon as the crisis was over!
For example, just like current financial crisis during Corona virus, breakout of SARS had huge impact on global stock markets and the wave also demolished Indian stock market. During SARS times, Sensex fell by 10 percent in just three months.
You may find it unbelievable but as soon as the SARS crisis was over, market generated absolute returns of more than 70 percent. So for example, if you had invested just one lakh rupees during January 2003 when the market was facing SARS crisis, you would have grown your investment by whopping Rs. 1,70,000 plus in just one year of recovery. However during swine flu crisis, it took some extra time for recovery but remember 3 year returns from after the Swine Flu market recovery was more than 25%.
If you are still dubious about the market recovery pattern, just look at these statistics from ET:
If you are planning to take a reckless decision of stopping your SIP, in fact, this is the best possible time to keep your SIP’s running with full force. Simply don’t make any miscalculation of stopping the mutual fund investment by thinking that you’ll be able to reinvest at a more profitable market entry. Believe us you will not be able to do this and your portfolio will definitely suffer.
What should be done during such crisis?
To be very honest, the current market scenarios (corona crisis) with such a steep correction since January 2020, actually providing a great opportunity for investors to invest in a well-diversified fund portfolio.
Just remember one thing; the very intention of investing in SIP is to safeguard your money from such turbulence that’s why it is called Systematic Investment Plan! SIP helps you to grow your portfolio through rupee cost averaging which can do wonders in long term.
Why Chitale Financial Solutions?
Chitale Financial Solutions offers wide variety of investment avenues for short as well as long term investment needs. With more than 30+ years of experience, we are one stop solution for a number of financial products like Mutual Funds, Insurance, Bonds, Fixed Deposits etc. We serve our clients with highest standard of transparency and integrity by putting investor’s interest first.
Mutual fund investments are subject to market risks. Please read the offer document carefully before investing