Corona virus and impact on investing
TLDR: COVID 19 and how to tailor your investments
Unless you are living under a rock, you are probably bombarded with news of the Corona Virus or the more official COVID-19 virus spread across different countries. I have been part of several investment forums on telegram, reddit to keep abreast with latest developments and the possible impact of the virus on the global economy.
The immediate hot take is that the market is correcting, what do I do? But for longer term investors, markets correct and recover. So your plan of action should be as follows
Build up your emergency fund (3 to 6 months worth of expenses) at a minimum.
Build your war chest - FD or liquid funds
Continue your SIP / DCA - do not stop because the market is correcting
Save your bullets - do not deploy all your cash into the market too quickly
Stagger your investments - Wait until the market corrects by a minimum of 10% before you start deploying additional cash
Don’t catch the falling knife - Do not enter a stock or fund just because it has fallen sharply. Look at the fundamentals
Don’t make investment decisions purely based on dividend yield - a 6 to 8% dividend yield might be tempting, but understand why a company is providing you such a high yield
Always look for value - Enter into industries which are discounted and provide long term value
Long term dividend growth is more important than pure dividend yield
Use index funds to diversify risks across stocks, sectors and countries
Hedge your currency risk by investing across different currencies
No expert can predict the top or bottom, if someone claims they can, run in the other direction
Do not chase fads, Bitcoin might be tempting but unless you understand crypto markets well, do not get into it
Do not panic exit your positions
Breathe - this too shall pass.
Conclusion
It is tempting to exit your equity holdings or invest your war chest at the drop of a hat. But sometimes the most prudent thing to do is to do nothing. Take it easy, think twice and make decisions for the long term
Good Luck and Happy Investing
