So many people quarantined or isolated in their homes is unprecedented. Social distancing means you are not going to meet too many people physically. That does not mean you cannot network online. Your smartphone is all you need. There are so many things to do while you stay indoors, safe and away from potential infections. In the wonderland of investment, this column has often highlighted the importance of knowledge. This column has often quoted legendary American investor Warren Buffett asking people to be greedy when others are fearful and vice versa.
While there is lot of punditry flowing all over the press and television on things you could buy in the market, this column would urge you to get greedy about knowledge. Sitting at home, it may be a great idea to add to your money quotient while you wait for the selloff in the market to stop.
Where to begin
Something that started as a medical problem is turning into a full-blown economic crisis. The situation will hurt businesses as demand for goods and services slows. It will hurt businesses as workers are forced to stay at home. There is both demand and supply shocks that would wreak havoc. It may be good to make a connection between the global medical problem and your finances. It is like building a flow chart of activity on a wall.
When it comes to news, you may want to stick to a few credible sources of information rather than reading anything that you lay your hands on. There is no need to watch every other news channel. You must cross-check information thrown at you at all times.
Before you forward any article, make sure it is a credible information source and not just a forward from an unnamed source. Reports from established media houses like the one you are reading now; wire agencies like Press Trust of India, Reuters, Bloomberg and international publications of repute should be relied on in these times of panic.
If you have personal finance books available, do wipe the dust off them and give them a read. If you prefer reading on your devices, you can buy digital versions of those books that would help you make sense of things happening around you. A simple internet search will throw up results. Those who can work from home are perhaps lucky to have some regular income. Those who are at home without work, it may be a good idea to sit and review your finances. A majority of Indians do not directly invest in the stock market. Only about 50 lakh active demat accounts are estimated to be around. There are barely 2 per cent people investing through mutual funds. That means there are an overwhelming number of people who would be indirectly affected by the impact of the situation. However, they have no direct stake in the financial markets.
You may think that those staying out are protected from the stock market crash of 2020. It is true for those who invested in the stock market recently as share prices touched a record high earlier in January 2020. Those investors would have lost notional value to that extent. However, when share prices bounce back, those who stay in the market and those who would invest now would benefit. An important reading you need to do is to understand that financial markets move in cycles.
Things going down also go up and vice versa. “Money is good for nothing unless you know the value of it by experience,” said P T Barnum, an American businessman who was called the Shakespeare of Advertising in 19th century.
Shoring up your personal finance knowledge is perhaps the best way to utilise the time you get by being at home. Knowing that markets would go up and understanding the reason behind that is useful. Many people are of the view that making money in the stock market is either for the lucky or for those who have enough money to lose. That is so not true. When share prices start to move up from where they are today, a lot more people should make money. The value of that experience would be priceless. (The writer is editor-in-chief at www.moneyminute.in)
What is lost now can be gained back later
Those who invested in the stock market recently as share prices touched a record high earlier in January 2020, would have lost notional value to that extent. But when share prices bounce back, those who stay in the market and those who would invest now would benefit. It is important to know that financial markets move in cycles.