With what was earlier predicted as a flu outbreak in late 2019, the coronavirus crisis has brought the entire mankind to standstill. Impact of the crisis which was predicted to be worse than the global financial crisis of 2008, we are soon moving towards global recession.
Since February 2020, global markets have shed more than US$15 trillion of wealth with every major stock exchange seeing a cut of about 20 to 30 percent. Key Indian indices like Nifty and SENSEX are also seen shedding roughly 30 per cent in market cap .
From India’s SENSEX as high as 42,273 in January’2020 to a 52-week low at 25,638, investors have really seen the market bleed like other crisis times. This is one of the times when at one end we have investors with panic mode and others who surely want to come out of the crisis with great returns.
In such times, when financial markets are clearly depictive of economic strength, sound asset allocation strategy would definitely be into “diversification” . This would include assessing your risk appetite and understanding that equity investment is not the only investment option available in the market and that investment into the equity market is not for someone who is looking for steady income in their old age. Such times really call for exploring more options if you are a risk averse investor. For e.g. The government has been providing magnanimous risk-free returns to its investors , where until February’2020 , post office deposits fetched 7.7% returns against mere 6% in private sector banks.
Not to forget, investment in counter cyclical products like sovereign gold bonds where investors have gained more than 50% absolute return in less than three years. Hence, along with SIP equity mutual funds one can also think of building SGB portfolio steadily (ofcourse to make sure when price of gold stars falling again, as current gold prices at exorbitant highs reflect that investors have surely missed the right time)
Also from risk averse perspective, if you are among those investors who are investing in stocks/mutual funds with an objective to meet lump sum requirement – it is always advised not to wait until the event to cash out your holding and rather start withdrawing systematically several months ahead and park your investment in a safe bank’s deposit , because one odd day when you get up to a news of war , major terrorist attack or consecutive monsoon failures – not only you may lose out on meeting the end objective but also forgo little returns you could have made.