Satyen Kothari
Be greedy when people are fearful and fearful when people are greedy. We’ve all heard this or some version thereof in the context of investing. However, as fear mounts due to COVID-19, many are wondering how to invest during this pandemic. Some are even wondering if they should invest at all. There are a lot of factors we have to weigh when investing in times of uncertainty.
It takes courage and discipline to be a smart investor. The markets have proven year after year that while such global events have a short-term impact, in the long term, patience always wins. Just open your browser and type “Sensex” or “Dow” in the search bar. You’ll see a simple graph of the market. If you look at the Dow Jones Index since its inception in 1896 or even the Sensex, you’ll see that the market has always recovered historically. The only people who lose are those who try to time the market. Here are some tips for those grappling with how to invest during a recession, pandemic or whichever economic fears that are keeping you up at night.
Be disciplined with your SIPs
Over the next 3-6 months, it’s crucial to stay on track with your SIPs (systematic investment plans). Do not stop them. This avoids all kinds of bad behaviour around market timing that we succumb to out of fear or greed. Stay the course and avoid taking any big decisions – don’t give in to urges and remember why you had a plan in the first place.
Be smart & aggressive if you have cash
Lucky you. If you’re itching to take action on some cash, think of adding money to an asset managed by a proven fund manager. However, have a plan that allows you to deploy it over the next 2-3 months if you are aggressive. This is the period where you have a chance to balance your investments and benefit from rupee-cost averaging that SIPs are known for.
Build the perfect portfolio
One must always focus on four key elements while investing. First, you must build an emergency fund. Think of this as setting aside 3-6 months of living expenses. You could keep this money in your bank or liquid funds. Once this is taken care of, think of investing for short term goals such as a wedding or saving up for higher-education. You can do this by investing in any short-term asset that doesn’t risk your core amount.
You can follow this up with investing for expenses you can foresee over the next 3-5 years. This is where your ELSS (equity linked savings scheme), Indian and International mutual funds come into play. You can take either moderate or aggressive risks based on your personal risk appetite. Neither one is wrong or right. Then, it’s the big picture time – invest for long-term goals such as retirement that are at least seven-plus years away. You can go for a concentrated stock portfolio here – but only under the guidance of a fabulously proven advisor – not based on tips. A balanced portfolio such as this will help you sail through to the other side with a big smile on your face.
Seek quality advisors & assets
The last and perhaps the most crucial tip: work with people who live and breathe investments. You need high-quality financial advisors with a proven 10-plus years’ track record who can point you towards the right assets. You wouldn’t let a dentist perform a by-pass – you need a cardiac surgeon. The same way, your investments need to be based on a combination of data and human experience. Talk to a wealth coach who understands your financial situation, can review your portfolio and work with you through the highs and lows, and suggest quality advisors and assets.
(The writer is Founder & CEO, Cube Wealth)
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