We may be able to resolve health issues relatively fast in this pandemic but coronavirus financial impact will take several years to settle down. Indeed, this has turned into a situation that no one could ever imagine off. With industries around the world taking a hit, corona has had its impact on the share market too.
It wouldn’t be an exaggeration if someone told you that the share market is pushed to a perfect bearish state, like never before in a decade or more. When compared with the peaks of January, NASDAQ has come down by nearly 30 percent. Experts reveal that the previous crash had caused a decrease of 60% on the overall index.
Hundreds and thousands of investors are truly troubled by the bear market. They ponder over strategies that would help them safeguard their hard-earned money. Above all, they are worried on how big the dip will be this time.
Time after time, the reason behind a stock market crash keeps changing. This bear-bull game doesn’t stay steady. However, the golden rules for surviving the bear market remains consistent. If you follow few steps, and stick to basic financial strategies – you will be able to protect your finances through the Coronavirus financial impact. It might seem challenging, but it is not impossible.
How to handle the Coronavirus financial impact on your stocks? Keep reading to know more about the Do’s and Don’ts.
Do’s of Bear Market Investment
Build a Cushion Around Your Finances
Technically, any situation that causes the bear market will have an impact on the economy. With crippling economies, your finances will be affected. A prolonged bear state will cause negative results on your income too. Delayed pay checks and salary cuts are common side effects of an economic downturn. This is why you should maintain a good, stable buffer.
The buffer should be able to uphold you for at least six months. As a result, you don’t need to touch your retirement funds. Before you pull together this buffer, try to clear all existing debts. This could be your credit card bills, loans or even utility charges.
Evaluate Your Risk Tolerance Margin
A lot of people believe that risk assessment needs to be done on the sunnier days. Well, this is not how it works. On your best days, you will not be able to gauge your actual risk tolerance level. It is during bear markets; an investors haughtiness gets revealed. Untold and unexpected details about your risk appetite will surface. Now would be the best time to analyze your risk tolerance abilities. And, the results can be very interesting:
If the Coronavirus financial impact is making you feel uncomfortable, you might have overestimated your risk tolerance ability.
The data and experience you endure during the bear market should be recorded. Try to keep up with the decisions you choose during these times.
Cold Feet Moments, Getting Ready for Battle!
Many times, people think twice about their investments, even when the stock market bounces back. A fully blown bear market can change your perceptions. But, when the market recovers to the fullest, they realize that their “fortune” just left. As a part of any investment strategy, you should not stick to the side-lines. To play safe and avoid staggered re-entries, pull together a plan now! Most of the time, staggered re-entries into the stock market will be expensive.
If you have money, which can be invested in the stock market – now would be the best time. As a potential investor, try to make use of the opportunity. Experts strongly advise investors to liquefy finances that can be invested in promising stocks. To begin with, you can consider selling debt funds. Use this money on your stocks for the next 6 to 12 months. Once the Coronavirus financial situation comes to an end, you will see steep rises. These are magical moments, which you wouldn’t see often.
Fundamentals Always Help
Even when the current crash is not caused due to our economy, the final impact and outcome will be similar to the previous one. During tough times, only rock-solid businesses will be able to survive. The weak ones will be affected the most. This is why you need to focus on the big brands, and reputed names. Never bet on newbie’s. Instead, educate yourself about businesses that are proven. Remember, only quality and proven companies can survive turbulences. It would be greatly disappointing to become adventurous during these sad, bear days.
A Financial Plan
Stock market investments should not be made on a daily basis. Instead, you need an investment strategy. Don’t play like a typical stock market investor, who doesn’t have a plan behind every dollar accumulated or lost. Without a good strategy, there are high chances of you making emotional decisions. In fact, many people liquidate their retirement and long-term investments for more stocks.
There is no such thing as the best time to create an investment strategy. Even today, you can pull together a plan. Gain more clarity on where you stand financially. If possible, hire an expert to help you with this.
Don’t of Bear Market Investment
Don’t Wait for Market Bottoms
Every stock market investor wants to fish for bottoms! Wouldn’t it be amazing to buy a stock when it hits the bottom, and then rides up? While you wait for the stock bottoms, you may end up burning your fingers. There is no harm in missing the lowest market value for a stock. In fact, you can start positioning yourself when the market starts to move upwards too.
Never invest all your finances on a single stock, in one go. Instead, split your funds over several months. Capturing the swing will be difficult, but you will not lose a heap of money. Rebalancing and asset allocation is much more important than fishing for bottoms.
Stop Fund Reviewing
Do you have the habit of checking your stock portfolio on a daily basis? If yes, you need to stop right away. Seeing your stock move downwards will force you to re-think about your investment. This may result in unwise investment bets. The coronavirus financial impact doesn’t give you a reason to judge your investment. At least for the next few months, you need to stop checking your portfolio.
For instance, your gold fund might be doing great, and your equities could appear horrible. This will trigger you to move cash into the gold fund. Any decision you make should be for asset reallocation. Don’t engage in this move if you are only worried about a drop in the value of your funds. Instead, execute the above move if you believe it would rebalance your finances.
A New Investment Strategy is a Big NO!
If the bear market is making you invest differently, then you are making a bad move. Panic and anxiety can change your investment strategies. Even experts tend to abandon years of training and golden principles during tough times. This diversion will trickle down and have a negative impact on your long-term plans.
Never be Over Defensive!
A bear market can encourage you to succumb and exit. This is mainly due to your panicked state of mind. Always steer clear off rash decisions. Such moves will result in an immature investment experience. A market that has gone down by 25 percent, will not drop by 100 percent in the next four months. This is not how the stock market works.
During tough times, the market always introduces new opportunities. You cannot embrace these chances if your money is hidden in the stars.
Instead of making rash decisions, you can always cushion your profile by investing in multiple companies. There will be a moment, when markets rebound and turn positive.
Stopping all Moves is a Big NO!
Many investors decide not to do anything, especially during times like coronavirus. Playing dead is not a great advice for everyone. Your age, investment and financial need decides if you can stay idle. Someone who has enough money to survive for the next decade or two, can stay calm. Else, you need to re-align and protect your money.
This advice holds good for people who are about to retire, or who need an immediate inflow of cash. After the coronavirus financial Impact, it can take months (if not years) for the markets to return. During this time, you need money to keep going.