The outbreak of the coronavirus resulted in unprecedented market volatility across the globe. Indian stock markets were also affected by Covid-19, and the NSE Nifty plummeted by around 23% in March 2020. In the last week of March, the NSE volatility index breached the 83 mark. The major reason for this crash was the flight of Foriegn Institutional Investors (FIIs) along with the prevailing uncertainty. In the wake of the coronavirus crisis, the government imposed a lockdown, which brought manufacturing and other corporate activities, across key sectors, to a standstill. This negatively impacted corporate revenues and industrial profits. Though the market has stabilised over the last few months, volatility still remains high, fuelled by weak investment and consumption patterns. As an individual investor, you must realign your investment strategy to suit the changed market conditions in a post-Covid world.
Additional Read: 5 Key Learnings from 2008 Economic Crisis that are relevant Today
Industry experts have provided some key strategies for investors in a post-Covid market scenario. Let’s have a look:
Don’t exit your investments suddenly:
After the lockdown was announced, the first reaction of consumers in the retail and FMCG sector was panic buying. A similar scenario was seen in financial markets, where several investors exited from investments. Here, industry experts underline the need for remaining patient in a bear market. The sharp market fluctuations will inevitably end, and the market will stabilise again. So, the need-of-the-hour is to have a long-term investment approach. Some experts even suggest that once you assess your risk-tolerance and existing financial situation, you can even invest in new stocks. For small investors, however, you must stay put with your investments as panic selling could ruin your financial health.
Invest in SIPs:
In a post-covid world, you must redesign your investment plan to ensure that it can bear with the market shocks. One such investment strategy in a post Covid world could be investment in the Systematic Investment Plans (SIPs). These mutual funds are comparatively less exposed to market volatility, and can provide desired returns in the long-term. In the aftermath of the coronavirus crisis, you can also use the situation in your favour by availing discounts on investment in SIPs.
Opt for other investment avenues:
Once the dust settles on Covid-19, you can start looking for different investment avenues, like gold or Exchange-traded Funds (ETFs). Gold has provided an unprecedented return of over 38% during the ongoing coronavirus crisis. Similarly, you can also start making investment in debt instruments, which are safer and better equipped to deal with crisis-like scenarios. Another option could be index funds and ETFs, which have a lower expense ratio, coupled with favourable returns.
Create an emergency debt fund:
Another key investment strategy in a post Covid world would be the creation of an emergency debt fund. Because of Covid-19, several individuals, including businesspeople and salaried people faced severe liquidity crunch. Market experts suggest maintaining at least six months emergency funds to deal with any liquidity crunch scenario. If you have not yet created an emergency debt fund, you should put a part of finances separate; with the sole purpose of creating this fund. You can also invest this emergency fund in liquid funds to further boost your financial health.
Additional Read: How and where to keep an Emergency Fund?
Make your investment portfolio strong by diversifying:
- This key investment strategy in a post-Covid world means that you should never put all your eggs in a single basket. Before the outbreak of coronavirus, investors primarily desired a portfolio with a maximum of equity assets. This was to maximise the returns. The present crisis, however, has reaffirmed that different asset classes react differently to the same macroeconomic event.
- Along with investment in different asset classes, you must strike a balance between long-term and short-term financial instruments. You must also invest in traditional investment instruments, like Public Provident Fund (PPF), fixed deposits, and mutual funds. Remember, all your investments should be in sync with your financial goals, risk-appetite, existing income, requirement of liquidity and age.
- A diversified portfolio in a post-Covid world will not only stave off market risks, but also ensure peace of mind and financial stability. This is one of the fundamental principles of investing, and the most important investment strategy in a post Covid world.
Thus the existing coronavirus crisis necessitates that investors reset their investment strategy in a post Covid world. Adhering to the fundamentals of investing, while staying patient in the existing Covid-19 scenario can allow you to minimise the risks of the current situation. As an individual investor, you can use the Moneyfy app from Tata Capital to access all your financial needs easily, from anywhere and at any time. This app which can easily be downloaded on your smartphone allows you to complete your KYC digitally, and remain prepared for making investments. It can allow you to set your investment goals, besides providing the option to compare different investment plans. What’s more you can also select the best loans and insurance options.