How quickly times and feelings change! For the first week of March, everything seemed to be going well and we were well on our way to achieving our best economic year with a two-digit GDP growth rate. With the second tsunami of COVID-19 coming, it all looks like a distant memory.
The second wave, in fact, was unexpected and very strong. We have gone from around 16,000 cases to 1,00,000 plus less than a month. We went to 2,00,000 cases in about ten days, 3,00,000 in less than a week, and then 4,00,000 in about ten days. This was not just a wave, but a tsunami.
This is also reflected in market behavior with indices adjusting to almost 5.8 per cent since the beginning of March 2021. Although it is a matter of concern, the biggest concern is market instability. The signal has been Yo-Yo since the second wave broke out.
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The greater the weakness of some high-quality stocks, the stronger the wage growth in Q4FY21. Some of the examples that come to my mind are TCS, HDFC Bank, ICICI bank among others.
The key question, then, is: What should an investor do in these unexpected times? Here are some tips for making hay, even when the sun is not shining:
A) Be realistic: The first step to finding peace of mind and finding your portfolios is to recognize and study the situation appropriately. Some things have changed and the sooner we accept them, the better for us. 1) This second wave, and the following limits are here to stay for a few months, at least. 2) It will have a Macro-economic impact of the same and therefore, double digit growth of FY22, may not be possible. 3) It will affect wage growth and again 25-30% Fifty wage growth is likely to decrease significantly.
The idea is to reconcile with a new reality, which will enable us to build our investment strategy appropriately. The sooner we do this, the better.
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B) Don’t panic: Certainly if Macro-economic conditions are tough and markets are volatile, your investment values may also change. This means that sometimes there may be adjustments in other high-value stocks, including quality ones. An important lesson is patience, if the business you are investing in is in good shape, don’t panic. Good stocks today will regain their basic value. Rash decisions are usually made solely to stay with them and regret over time. So, no matter what happens, never panic.
C) Think long term: Remember the saying: Hard times do not last long, Strong people always do the same. Similarly, whenever disaster strikes, whether financially or otherwise, the world seems to be heading in the right direction. However, it is always better than we think. If the financial world can get out of the 2008 crisis, then there is nothing too big to be solved. Impact on the economy, 2020 is even worse than it will be in 2021.
So, think for a long time and adjust your portfolio accordingly. Think of businesses that will survive and prosper, companies that will gain leadership and industries that will see growth dragged rather than shrink. In fact, think of Cofi Can, a company that has a fine record. This will bring great benefits in the future.
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D) Distinguish between economic and human impacts: The epidemic situation in our country is dire and human health has been very poor. However, as an investor we need to keep our emotions absent when aligning positions. Generally, the economic impact is not as bad as the human impact, which we believe is also the case at this time. The sooner we read this, the better.
E) Quality, Quality, Quality: Lastly, but never the least, invest in high quality stocks. There is no substitute for that. Leading companies in a growing industry with clean management and bright balance. What do you do when these stocks see a correction? Invest a lot, with all the sensible improvements. Focus on building a portfolio and building long-term wealth.
Follow these simple rules for building long-term wealth.
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