Investing in the Time of COVID-19
The Coronavirus Crisis has brought unprecedented challenges for investors and traders worldwide. As of now, the virus has tragically claimed over 14.5K lives and resulted in about 326K cases globally. Stay updated with the latest figures here.
Global Stock Market’s Downward Spiral
Billions of dollars have vanished from the global economy as stock markets plunged dramatically. We’ve seen major indices drop by 25% to 50% in just a month.
Long Road to Market Recovery
The Coronavirus Crisis crisis won’t fade overnight. Markets are on a journey to find a balance, a point where buyers and sellers agree. Predicting this turning point is extremely tricky.
Strategies for Traders and Investors
Consider these five strategies to weather the financial turmoil:
- Steer Clear of Day Trading: The current market volatility might tempt you to day trade, but it’s risky. There’s a high chance of sudden losses, especially when trading on margin.
- Stay Invested in Bluechip Stocks: Hold on to your bluechip large-cap stocks. Consider increasing your investment when these stocks dip by 5%. Historically, they have bounced back from significant downturns.
- Keep Up with Your SIPs: Don’t halt your SIPs (systematic investment plans) now. They are great for dollar-cost averaging and promise long-term gains.
- Be Cautious with F&O: Avoid futures with high margins. If you’re drawn to trading, explore options instead. Buying out-of-the-money options might limit short-term losses.
- Invest in Education: Now’s the time to deepen your knowledge. Learn about technical analysis and algorithmic trading to be ahead of the curve when the market stabilizes.
Guidance for Navigating the Crisis
Adopt these Do’s and Don’ts to protect your investments during these challenging times:
- Stay patient and optimistic. The situation will normalize eventually.
- Rebalance your portfolio, focus on strong large-cap stocks, and let go of the underperformers.
- Diversify into stable assets like Gold and Bonds.
- Enhance your skills through paper trading, avoiding real market risks.
- Avoid impulsive decisions in your trading.
- Refrain from opening new positions with high margins.
- Don’t obsess over predicting the market bottom—it’s nearly impossible.
- Stay away from short selling to avoid uncapped losses.
- Limit watching market fluctuations continuously to avoid stress and anxiety.