Coronavirus may have changed a lot but not this investment mantra

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By Dhirendra Kumar

Revenge shopping. Have you ever heard this phrase? I bet you have not but it’s one of the unique things to come out of China recently. According to a recent article in the Hong Kong-based South China Morning Post, the post-Covid opening up of retail in Chinese cities has seen a surge of ‘revenge shopping’, especially in luxury stores. One store of French chain Hermès had sales of $ 2.9 million on the first day after it reopened. Now, people are wondering whether ‘revenge shopping’ will spread to other types of stores too. Will the middle-class also participate in revenge shopping, or will it stay limited to the wealthy?

Anyhow, for the rest of the world, this stage is still some months away. As of now, people are looking for signals, anything that is visible in the tea leaves, for how exactly will businesses, the economy, and their own savings and investments do in the post-Covid world. There are plenty of signals visible, both positive and negative. Depending on your mood at the moment, you could pay more attention to one or the other.

While revenge shopping is yet to be seen only in China and only in a small segment of the population, stock markets around the world appear to be seeing a lot more positives than most other people can. As I write this column, the Indian equity markets haven’t had a seriously negative day for two weeks. Even though the markets are down from the pre-Covid phase, the atmosphere of extreme doom has lifted. They could well be down again in a few days, and if the past is any guide, they could suffer yet another steep crash. However, the details of the ups and downs do not matter.

Under all circumstances, pandemic or no pandemic, it’s better for investors to focus on what they can control. You have control over when you invest, what you invest in, what price you invest at. You can control whether you invest it in a great excitement in some bubble, or whether you run away from investing when some disaster strikes. You also have complete control over the money you are going to invest in. How important is that amount of money in the general scheme of your finances? How long can you invest it for? Will you need it suddenly, or is it for a planned expenditure? How stable are the rest of your finances?

That’s the stuff about which you are in control, or you have real information. The veracity of the information and understanding you have over your own finances is (or should be) of a very high quality, a whole lot higher than that of your information about the course that Covid or its economic impact will take.

Some of my readers say that ever since the Covid crisis started, I’ve been guilty of repeating the mantra ‘stick to the basics’ too often. They are completely wrong. I have actually been repeating this mantra for the last 25 years, Covid has nothing to do with it! I hope to keep repeating it for decades to come. And, more importantly, beyond just me writing and you reading about it, I hope that all of us will continue to practice it in our investing.

Extreme times, whether extremely good or extremely bad or extremely uncertain, also hold extreme temptations of breaking the stock to the basics rule. At this time, do the least possible. Ensure that basics like term insurance and emergency money are in place. Ensure that you have an asset allocation plan in which money that you might need for the next 3-4 years is in less volatile types of mutual funds. If your asset allocation is well-thought out, don’t mess with it. Don’t mess with SIPs that are continuing. Once again, stick to the basics!

(The author is CEO, Value Research)


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