Did anyone tell you ‘This time it is different’ and this panic caused by Trump is the worst thing since The Plague hit us about a Century ago?
Or did they say ‘This time it is NOT different’
Both mean the same thing for the common investor. What should you do as an investor?
1)Remember that there is no Magic to make the pain disappear! When the equity markets go down, there will be some pain! You will have to endure it yourself, so learn to suffer the pain.
2) Equity markets will ALWAYS be volatile – and hence the rewards are high too! A straightforward 7% p.a return is what you will get in PPF and investments like PPF. Equity will give you good returns -but that calls for sitting tight during tough times like this.
3) Trying to predict what will happen in the market is impossible. You are trying to predict what will happen in the market (maybe easier?) and also predict what Donald Trump will do tomorrow. Both are tough indeed!
4) Check your asset allocation – and make sure you have enough cash for at least 18-24 months in the bank. As long as you keep getting your salary, this is still just a standby! Remember these changes could even hit your job -be prepared for that too.
5) Just like the Covid attack on your health, this attack is on your wealth. Keep increasing your stamina (increase bank balance), do your exercises (monitor asset allocation) and be ready for a long grind.
6) This game by Trump is unprecedented – most investors, their CIOs, and the investment banks themselves are an emotional mess. Will they be able to think clearly is not sure.
7) In your investing life, be ready for such falls, learn to brace yourself and get hurt less. As long as you don’t need the money in the next five years, you don’t have to do anything.
8) If you are scared, stop the SIP that is happening. This might lead to regret – if the market goes up like it did in July/August of 2020. In March we thought the world was coming to an end, but in September the market hit an all-time high!
9) In case you are very scared you can make huge, big changes in your portfolio – like selling Indian Tech companies and buying American stocks. Do remember that US Stocks have tanked over the past few days and you may have to wait a bit.
10) Some of these actions – like doing nothing - are likely to have minimum regret later on. However, if you make wholesale changes the regret could be huge. Decide on what to do.
11)Ask your investment and tax advisor about Loss Harvesting and such techniques. Finding an advisor who can talk about all this is not easy, but it is surely worth the effort – of finding him/her!
12) Be calm and composed – taking an emotional decision when the markets are already down will not help. You might do something which will be harmful.
PV Subramanyam
writes at www.subramoney.com and has authored the best seller ‘Retire Rich - Invest Rs 40 a day’