My investment portfolio is doomed!! All my investments are at an all-time low!! Shall I exit the market!! Shall I book the loss and move out of the market invest more!! Questions keep coming to me day in day out ever since we came across this market mayhem that had started in Mar 2020. This pandemic is threatening to impact the global economy on a larger scale. So yes, what should we actually do? People have been asking me the same question umpteen number of times. I would say of course, things will get worse, before the dust will settle down and things starts to stabilise and get better. However, the basics of the life, the world dynamics will not change.
Let us look deeper into the history – The Spanish flu pandemic of 1918, the deadliest in history, infected an estimated 5 crore people died worldwide—about one-third of the planet’s population—and it claimed the lives of 1.8 crores Indians. That disease was far more worser than the current COVID19!
Then we had the great depression of 1929. However, one fact that remains constant was no matter how disastrous the impact on market was, it was short-lived. Remember, life moves on. People live their daily lives – they work; they eat; they move. If we look at the last 25 years have been a great education for all of us who invest in the stock market. It is not that this is something new. I still recall the days of 2008 when the market crashed after the Lehmann Brothers fall back and global recession gripped the market across the globe.
What can we expect now? The obvious answer is that we do not know what to expect. The impact could be deep but short, or it could be opposite. Some industries will be impacted to a great extent like the aviation and travel industry – some might have one kind of an impact, some another. Some will recover quickly. Some might cut off or stay away from the South East Asian markets, some will try to find ways to improvise and become self-reliant. So, whatever I am saying now all hints at uncertainty, the markets will dwindle and may drop by 30 to 50% or may be greater. No one knows at this point of time and remember this is not uncommon this had happened in year 1987, 1992, 2001, 2008 and so on.
One useful thing to do would be to look at past declines in stock markets and see what happened subsequently. The question we should be asking ourselves is how long it took for the market to bounce back? Or I should say how much time it took for the market to bounce back and recover from a deep shock? On an average 18 to 24 months!! Are you surprised? You should be but if you look at the market history that’s how quickly market has recovered. For more details refer to the several websites which will provide you the necessary stats and you can see for yourselves. What would you construe out of this am I saying to you that equities would have recovered one or two years from now? I would say the chances of a bounce back are strong.
Of course, in times of a great crisis everything looks dark. Human psychology, the media, the newspapers, business news everywhere the pessimism starts dragging you to the core of nothingness. As in every crisis, managing one’s psychology is important. Yes, there will be slowdowns and recessions but a bounce back is inevitable. This brings us to the real question: what should you actually do? The answer is the same that it ever was: Stay put, if you are equity investor buy quality stuffs, but please stay invested do plan your emergency kits (funds) as I always keep stressing upon and a medical insurance cover. In fact, this is the greatest time to buy quality stocks. Let’s stay optimistic.
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