Change is the only constant, a phrase that I learnt during the early stages of my career in Citi and it is one thing that remains pertinent even today. If I asked you what 2020 held for us, just 80 days ago as we started this new decade...how many of you would have said COVID-19, Quarantine or Social Distancing??? And yet, the question that many seem to ask is ...what will the world be 1 year from now? How will all these massive global quarantines impact our futures and as importantly, our present??
History has a great many lessons for us!
During 1918-19, a great influenza epidemic swept the world. About 5 crore people died worldwide. India was the worst hit, with about 1.8 crore dead which was about 5% of the population at the time. That disease was far worse than SARS-Cov2 is, and medical science was primitive compared to today. On top of that, the First World War (1914-18) had just ended. And yet, despite all that, the years after that were a great expansion of economic activity and prosperity. So much so that the exuberance got overdone and resulted in the crash of 1929 and the ensuing depression.
Change is the only constant, a phrase that I learnt during the early stages of my career in Citi and it is one thing that remains pertinent even today. If I asked you what 2020 held for us, just 80 days ago as we started this new decade...how many of you would have said COVID-19, Quarantine or Social Distancing??? And yet, the question that many seem to ask is ...what will the world be 1 year from now? How will all these massive global quarantines impact our futures and as importantly, our present??
History has a great many lessons for us!
During 1918-19, a great influenza epidemic swept the world. About 5 crore people died worldwide. India was the worst hit, with about 1.8 crore dead which was about 5% of the population at the time. That disease was far worse than SARS-Cov2 is, and medical science was primitive compared to today. On top of that, the First World War (1914-18) had just ended. And yet, despite all that, the years after that were a great expansion of economic activity and prosperity. So much so that the exuberance got overdone and resulted in the crash of 1929 and the ensuing depression.
However, the fact remains that the impact of the medical disaster, even such a severe one, was short-lived. Life goes on, billions of people live their daily lives, they work, they eat, they buy things. Even at this stage, we would hazard a guess that it will change less than we think it will. Humanity and the world have seen worse and recovered pretty quickly.
So what does all this mean? What should we expect??
No one knows, and it is this unknown-unknown that is causing all the panic in the markets. The impact could be deep but short, long and shallow or anything in between!! Impacts on various industries will differ, and impacts on regions will also be different. So how have markets performed when they fell so much in the past...again, history has good lessons for us. In most cases historically, we have recovered within a year with very strong recovery into 2 & 3 years.
I'm not saying it will recover in a year....but the chances of a bounceback are strong.
There is no way to master the uncertainty in equity markets. There will be times your realised returns beat your own expectations and at times, they will fall short. Your investments should work for your goals and never the other way!! The way to overcome uncertainty is to stick to your goals and your asset allocation across market cycles.
What are a few things you should do? 1. If you have additional money to invest, slowly nibble away. 2. If you don't have additional money and are fully invested, then treat your portfolio as a friend you are upset with...don't look at it!!
3. If you don’t need the money now, stay invested. 4. If you aren’t close to your financial goal time horizon, stay invested. 5. If the return expected from your long-term investment has been eaten up thanks to the crash, extend your time in the market (this is a key part of equity investing) and stay with quality funds.
Source: Value Research & Moneycontrol