Wealthcare Investments

Your Investments v/s COVID-19

While there are lots of news, advisory and expert opinions, Investor gets confused and out of place.

I am attempting to put a brief note on all this in one place. It might look easy task for you, but believe me it’s not. I am happy doing this for the larger interest of Investors.🙏

You must ask yourself - Where is your sight at the moment? Is it on your goal or the short term market mayhem❓

I am trying to give some perspective on whats happening now and what lies ahead.

What is happening this time?

1)      First time we are seeing Lock downs across world. It has never happened.

2)      It’s not financial crisis but the Health crisis of different magnitude. Fear is the highest this time around. Not sure if Social media adding fire to fuel?? This is first major crisis with highest social media users.

3)      Such a sharp correction in less than 3 weeks is historic. Indian stock indices have corrected in range of 30-35% in 3 weeks. World over the story is same. Investors are caught in this fall and couldn’t act in time.

4)      Volatility Index (VIX) is higher at around Oct 2008 levels (Subprime crisis).

5)      All asset classes are falling. Be it Gold, Crude, US Treasury. People feeling safe in cash only. CASH IS KING phenomenon back after 2008.

6)       The war is still on. Hence the extent of damage is yet to be ascertained. World is trying to guesstimate the loss. Actual loss can be ascertained once crisis is behind us.

7)      Human trials have started this week in USA. Results will take 6 weeks to come. Credible vaccine will take another one year to reach us.

8)      Major countries will have to resort to monetary stimulus and Interest rate cuts. Both are being used since 2008 hence the weapons are limited and few. Interest rates in western world are zero or near zero.

9)      Largest consumer of the world, USA and Europe are gripped with COVID 19. Meaning demand and growth will fall dramatically. World may slip into recession. Who knows!!

10)   Europe and USA are in 3^rd phase or COVID-19. Their COVID 19 numbers are going to be crucial for world’s growth and economic outlook.

11)   1% rate cut by US Fed and other programs failed to cheer the markets. More announcements will come but may not have teeth to reverse the blood bath trend.

12)   As per Goldman Sachs, Global GDP estimate stands at 2% which is lowest in 30 yrs.

Your Investments interalia goals are sacrosanct and must be funded for. What should you do as investor now? Here are few points that you can consider. Trust me I am also in same boat as you!! May be less or more. I have my sight set on revival and long term.

If you have already invested and your goals are coming up in 6-12 months?

You should have been watchful of the same at least one year in advance. Timing markets at end is always risky especially in times like this, when valuations were stretched and economic situation was poor. May be you have learning for future and your kids to educate on. You may have to use other source of assets to fund the goal or delay or reduce your goal. For non-negotiable goals, speak to your Investment advisor and figure out the best way.

If you have already invested and your Goals are coming up in 12-24 months

You don’t have to worry much!! COVID 19 dust would have settled by that time and you should be on course with your goal funding. But please do remember that you need to start planning to withdraw as you approach your goal time. Don’t try to outsmart market and wait till last few months. Remember funding goal is important than extra returns.

If you have already invested and your Goals is only long term investing!!

You are possibly the best placed category🤴🏻😊 

While there are so much negative that I have enumerated above, there are few positives too!!

1)      India’s attempt to curtail the outbreak of COVID-19 is praised by WHO. Yesterday announcement by PM suggested that they are going to response will be quick and meaningful to steer out India from any economic crisis

2)      Country of large population with high density, the patients’ numbers are quite low as compared to any developed country.

3)      Indian Government is proactively working and entire machinery is working hard to curtail the Pandemic.

4)      Crude is corrected substantially and is trading at 18 years low!! Yes you read it right. The oil prices are likely to remain low for good part of 2020 as the global demand for crude is not likely to go up any time soon. Also Russia and Saudi Arabia would not like to lose market share and hurt their economic growth.

5)      Drop is crude price by 1 USD per barrel helps India save upto USD 1.5 billion.

6)      As per some reports India is likely to save USD 30 Billion due to fall in crude. That’s staggering Approx 2.25 lakh crore if prices remain lower thru 2020.

7)      India’s major GDP contribution comes from domestic consumption. Hence we are unlikely to face so much trouble due to fall in exports due to global recession. However since we are not decoupled, we will be part of the onslaught but we will recover faster as our economy will not be too much out of shape as it happened after subprime.

8)      India received good monsoon last year hence the Rabi crop is likely to be much better which means rural demand may pick up.

9)      India’s GDP growth has been below potential since many years hence the valuation was accordingly. Now if it goes up, it will be significant on lower base.

10)   India’s current Market Cap to GDP ratio around 58%. Long term average number is 76%. The highest Market cap to GDP was 149.5% in December 2007 and the lowest was 45.9% in December 2003.

11)   Current P/E and P/B ratio are lower than long term average. Its lowest in past 4 yrs. 3 years returns of major indices are negative despite the fact that India’s GDP has grown, albeit at lower pace.

12)   Froth of the Indian market has gone away now sanity prevails in broader markets.

13)   Considering point # 10 and 11, it’s not at all good levels to exit equity. But good levels to average cost or start fresh investing. One must be careful about how much and when to invest. Consult your financial advisor. Also please note that markets have already discounted the bad news in price. Market may substantially only if the news gets gravely worst.

14)   As per Goldman Sachs, global recovery would come by Mid- 2020.

15)   Since India will be better place among Asian and Emerging Markets peers, foreign flows are likely remain robust.

16)   Last but not least, after all crisis that has gone by, equity investing has been rewarding after the crisis was over. This too shall pass😊✔.

We were not positive on markets and were having cautious call since 3 years. Hence we had decently good allocation to Asset allocator fund, Hybrid funds, liquid fund which has helped our client to minimise the notional loss. We are gradually increasing the equity allocation hereon!!

In case you are stuck on what to do and how to do? Your Wealth Manager is not responding or clued on or you are willing to take second opinion, please feel free to speak to me on 9833778887 or write to me at wealthcarein@gmail.com. I will happy to help you without obligation.

As an investor, you must follow these 2 lines

“Never let a good crisis go waste”- Rahm Emanuel.

“There are decades where nothing happens, and there are weeks where decades happen.”-Vladimir Lenin

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Author –

Bhavesh D Damania

Founder - Wealthcare Investments

EduPrenuer, TV show panellist and Blogger

You can reach him at 9833778887 and wealthcarein@gmail.com

"Risk comes until you know what, where and why you are Investing"