· Coronavirus has spread rapidly across the world affecting our lives and even our financial well being.
· The panic created by this pandemic has caused investors to either sell their investments or wonder whether they should invest more.
· Looking at previous outbreaks like SARS and H1N1, investment markets have shown a track record of recovering after a drop.
· In such a case, it is essential to not panic, be careful with your investments, and wait for markets to recover.
· Some measures you can do before markets recover include,over reviewing your portfolio, letting your investments be, and not worry about your net worth.
The topic that has taken the entire world by storm these days is thethe novel coronavirus. COVID-19, the illness caused by this virus, has spread much faster than expected. With more than a million cases across the world, the world is eagerly waiting for a cure. While research is underway across the globe, there is no telling when a cure might be ready.With official announcement from the World Health Organisation, the illness has been declared as a pandemic like the outbreak of Swine Flu/H1N1 some years ago.
Looking at all of this, most of the world is concerned about how the virus can affect health and their way of living. But there are also other concerns related to the global economy. In such a time, protecting investments gets equally important as protecting yourself.
Impact on finance
Similar to every other timewhen a pandemic outbreak has been declared, the Coronavirus has had a major impact on financial markets. This can be seen by major stock markets around the world witnessing sharp changes.
These changes have created panic amongst investors leading to a divide. One portion of investors corrections are selling significant portions of their equity investments, and investing on fixed income products.
On the other hand, another section of investors finds themselves in the dilemma whether they should use this opportunity to invest further when the markets are lower. However, as your investments are probably years’ worth of savings and careful planning; you need to cautious while managing them right now.Many financial advisors recommended looking into similar conditions from the past for insights.
How markets reacted during past pandemics?
Since the outbreak,financial markets have seen sharp changes leading to a pressure of selling interests among investors. However, this is not the first time something like this is happening.As seen in previous pandemics, markets saw a steep fall only to rise higher than before. However, you have to stay invested to benefit from it. Here are a couple of examples for you to look at:
· SARS
Similar to Coronavirus, outbreak of SARS in 2003 had a major impact on global stock markets limiting their returns to 8.64%. However, this impact was short-lived. Within 3 months global stock market returns doubled to a 16.36% and reached a 21.51% in a matter of 6 months.
· H1N1
In the case ofH1N1/Swine Flu, the outbreak was bigger than SARS. With around 25 million confirmed cases across the world, global stock market returns went down to a mere 10.90%. However, within the next three months, they went up to 19.63%. Moreover, investors enjoyed 39.96% returns within six months.
This just goes to show that global markets have a record of recuperating from the impact of a pandemic. It further proves that with careful planning and execution, you can not only protect your investment but also generate wealth.
What should you do?
While markets have shown a track record of recovering, there is still one question that remains. Whatshould you do until the market shows signs of recovery?Here are some ideas:
Revisit your portfolio
A portfolio is essentially a collective representation of all your investments. Now, any changes you make to your investment linked plans will have positive or negative results known as returns and loss respectively. What these results are affect your portfolio. Hence, looking at your portfolio gives you a holistic approach towards managing your investments.
Leave your investments undisturbed
Many financial advisors believe that it is better to leave investment linked plans undisturbed in such a time. The logic behind this advice is that any drop in the market will only truly affect your investments if you panic and sell them. This way, your losses will berealized. Hence it is better to sit tight and at least let the market recover to its previous position before making any changes.
Stop worrying about net worth
Generally, it is better to keep track of net worth as it helps you monitor your financial progress. However, during a pandemic it is better to not do so. As you may have already found out, that stock markets go down during such times and rise back up after they get better. As the drop is expected, it is better to not panic. Simply put, during a pandemic, your primary focus should be to preserve your investment and not worry about the dropping value.
After some time, a cure or a vaccine will most likely be developed and life will go back to normal. Hence, it is better to keep that in mind and look towards the future when making a decision about your investments. Hope this blog helps.
