Embrace the BEAR
I am sure you are hearing a lot about Coronavirus counts daily, precautionary measures taken by governments & businesses, coronavirus impact on businesses worldwide, Oil Price War, and how the world seems to be falling apart.
I wanted to reach out to you personally and give a certain perspective. I am addressing this purely from an emotional assurance and a financial perspective (So that you can make wise financial decisions). Feel free to write to me if you have any questions.
1. The first thing to do in any crisis is to stay calm (which is the most difficult thing to do) and IGNORE the noise… What would happen if you don’t read any news for the next 3 months? I have an interesting point to make here (which I call The Third Type of Investor… I will come to this towards the end of my email).
2. The stock markets in the last few weeks have given a once in a 7 or 10-year opportunity due to all the reasons now publicly known (Coronavirus impact on businesses, Oil Price War, Recession, etc). As I had written in the last note that expect increased volatility in the markets in the following months… We don’t know how long this will last but doesn’t seem like it will last more than 12-18 months…Even the global financial crash that was triggered by huge excesses lasted for 6-8 months after September – October 2008… In the last 20 years, this is the third time we are seeing an opportunity like this…
Will the markets go down further? Surely, they will, and you will start hearing different guesses… The media will want you to be fearful, but this is indeed the time to be greedy. Here is the way to look at it:
a. Always practice goal-based investing which means that NONE of your short-term money will be in equity mutual funds. This means all your short-term money will be in investments THAT IS NOT EVEN IMPACTED by this fall. Invest only Long-Term Money which you don’t need in the next 5 years in Equity Mutual Funds.
b. For every seller today there is a WISE buyer. Yes, there are more Sellers than buyers, but the wise ones are buying when investments are on Sale.
Here is what you should be doing and enjoy this financial roller coaster ride:
1. Ensure that you have 6 months of liquidity in liquid funds that you can use for any emergency. If you are running a business, you might want to re-look at this and plan for additional liquidity. If you feel more secure with a 12-month liquidity go for it.
2. Continue with your SIPs and if possible, increase your SIPs. If you haven’t started yet, Just Do It.
3. If you have any surplus assets, after keeping sufficient liquidity, invest additional amounts through STP (Systematic Transfer Plan) over the next 12 weeks.
4. If you have debt funds, this is the time to sell high (debt funds) and buy Low (into Equity Funds through STP). Yes you need to check about exit loads and tax impact (which we will guide you on) but an exit load of 1% is not a big cost to pay in such times when the markets have corrected by 30% plus.. These are uncertain times, but this will be over at some point and things will return back to normal. People always say I wish I had bought when the markets were low, and I am sure a lot of people will have this regret in the next few years.
5. Utilize tax-loss harvesting as a strategy booking out short term capital losses from some existing investments and re-entering these same investments…You can set off the losses against any capital gains in the current financial year or carry it for the next 8 years.
6. Write to me if you have any questions.
Read this 1-minute Nano Learning “The Third Type of Investor“.
This is the time to be that “Third Type of Investor”.
Finally remember that the world is not going to end (If someone thinks it is, then there is nothing to worry because we will all be dead)…History is repeating itself in the financial markets after a long time (Coronavirus this time) and will repeat itself in the future too …This time, let’s focus on our goals and take advantage of such financial opportunities (Yes opportunities).
Till then, please be safe and take care of your health, your family’s health, peace of mind and Live HappyRich.
P.S Feel free to reach out to me at any point of time. You are Not Alone…
P.S P.S When I started writing this post in the morning the markets were down 2000+ points, now they are up…No one knows where they will head next but you stay FOCUSED on your GOALs and Act Wise.