The fear of coronavirus is panned globe at this point in time. The fear has driven lockdowns, quarantines and halted industries across 51 nations, thereby resulting in economic slowdowns. Many investors are in nail-biting situations, weary of their investments, and frantically trying to protect them. The real question, however, is whether you should take advantage of the slow down to invest in the market.
Market rule: History repeats itself
The corona carnage is happening all over the globe, just like it did during the SARS virus outbreak in 2003, Influenza outbreak during 2004, or more recently the Ebola and Zika virus outbreaks during 2014 and 2016, respectively.
World economies are integrated. As in the cases of the above-mentioned pandemics, the corona outbreak most definitely will impact global growth and in turn, global GDP will face its brunt.
Just a short-term glitch
The markets are volatile at the moment. This can be extensively worrisome for short-term investors. However, this is not much of a concern for long-term investors. According to market experts, in the past few years, markets have rallied a lot. This has resulted in it being driven by surplus liquidity. Many are true to believe that the COVID-19 slow down is a well-deserved correction. Previous epidemics like Ebola and SARS witnessed a correction to the tune of 5-12%.
According to experts, as in the past, this too is most likely a temporary set back. Reports in 2003 showed that the US S&P lost 3.6% during the SARS outbreak but gained 33% a year after the outbreak. Concurrently, in the Indian context, BSE Sensex lost around 10% but gained a whopping 83% after the pandemic. Zika outbreak figures listed a 13% fall during the outbreak and a growth of 24% post it. It is expected that as in the past, the markets will recover after the corona outbreak in another three to four months.
What should you do at this point?
Experts say there’s no need to panic in such situations. It’s evident now that markets regularly go through these cycles. It’s also advisable that one should use this opportunity to invest for the long term. However, experts also advise that it is best to stay away from investing directly into stocks if you don’t have the expertise or wherewithal to research and number crunch through each company’s financial statements or assess its financial health before making a decision. It’s advisable to use mutual funds as a tool and allow a fund manager to invest on your behalf.
Market volatility provides an excellent opportunity to build your wealth over a period of time. It is important to identify that it is a part of the market cycle (don’t know what a market cycle is? No worries, we got you covered. Read out blog – ALL YOU NEED TO KNOW ABOUT A BUSINESS CYCLE). It is therefore advisable for you to start or continue with your investments through SIPs or stick with your plan of asset allocation. Long term equity investment is highly recommended.
All in all, continue investing. Accumulate more asset units. The returns will come through, even if a little delayed. Don’t let this temporary market correction faze you from your plans.