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Strategies For COVID-19 Stock Market



strategies-for-covid-19-stock-market

Saroj Wagle

 

Indeed, financial markets are suffering due to the COVID-19 virus. These are very worrying times for people all over the world from a personal perspective and also in terms of the impact on financial planning strategy.
The value of a flexible and robust financial plan has never been more important than now. As few will completely avoid any adverse consequences, there are a number of actions we can take to minimize the negative effects on financial planning strategies. What, therefore, are the issues we should address, and how can we protect ourselves from the worst of the ‘COVID correction’? Here are some of the insightful ideas regarding the financing planning strategies:

No ‘Panic Sale’:
We are all too aware of people ‘panic buying’ in the shops and the damage this does to supply chains and the availability of certain essentials. The panic selling of investments also has a harmful impact on markets, whereby the more people sell, the further prices will fall. Historically, stock-markets have always recovered from major corrections; it is often best to ‘sit tight’ and wait for the crisis to pass. 
If you’re drawing an income from equity funds, you should consider investing this for the time being. As markets recover, money that remains invested will benefit from this action. You could, perhaps, switch off income withdrawals from your emergency fund in favor of taking income from cash reserves. When markets turn around, this can be reversed, and cash accounts automatically replaced from realized equity gains.
As unappealing as it may be to check on your portfolio, there might be changes you can make which will limit the damage. You should also try to reposition your assets as part of your financial planning strategy so that you can take full advantage of the recovery when it comes.
Investment Opportunities
In fact, it is likely that there will be changes to the way in which we conduct business, as more and more individuals experience the benefits of working from home and companies endeavor to replace people with automation. Technology is the driving force behind this change; funds that invest in Artificial Intelligence will inevitably benefit from such a transition. Investment in Biotech companies may also be worth considering. A vaccine for COVID-19 will be found at some point in time. The reward for the pharmaceutical industry will be significant in terms of share price and market development opportunities.
We should all be on our guard against false behavior. We would also advise investors to stay away from unregulated, esoteric investment schemes. Unfortunately, COVID-19 related scams are already in our midst. The current situation is a gift to boiler room scammers, don’t become a victim on them.
After the 2008/9 banking crisis, there was much talk of ‘equities being finished’. Fortunately, this has not been the case. Even after the recent stock-market correction equity indices are still nearly 3 times higher than the low point of 2009.
In the context of Nepal, on Tuesday, the benchmark index at Nepal Stock Exchange Limited (NEPSE) has hit the second upper circuit of 5% at 11:36 AM. NEPSE has increased by 5.00% percent or 63.06 points to close at 1,323.81 points in the first trading hour. Nepal Stock Exchange has now suspended its operation due to the continuous rise. On top of that, there is no secret recovery formula for investment portfolios that have ‘taken a hit’ over the last month.

Talk to Your Adviser
We are not alchemists, but we can work with you to find the best route forward and help make sensible changes where necessary. It may be that you have to completely rethink your financial planning strategy; it’s always good to be able to do this with someone who has the necessary experience and qualifications to give an unbiased opinion. A good adviser will consider your whole situation and ensure that your financial planning strategy makes sense and is in context with your personal circumstances. Finally, we should do everything we can to protect ourselves and our family from the worst of this terrible virus. Let’s listen to experts and be careful!

(The Author writes regularly for TRN)