Key investment lessons learnt from Covid-19

With Covid-19 outbreak, we are probably in the midst of one the worst health challenges in the last century and if history is any proof, we hope that we will emerge stronger and better. The crisis has not left any aspect of our lives untouched including the financial markets. While we believe that things are going to get better soon, here are some key lessons we have learned with respect to investments and portfolio strategies: 

Investors need to be comfortable with volatility | Seasoned investors know this! Markets are subject to multiple cycles of volatility. The current volatile market environment (as a result of the pandemic) needs to be viewed by investors as a time to reflect upon their existing portfolios and understand their investments. Credit: PTI Photo

You can’t time the market | As an investor, trying to figure out the bottom of the top can be a futile task, and instead, investors need to focus on time spent in the market. We do know that, eventually, markets tend to recover. We have survived the global crisis in the past and will continue to do, even this time around. So the more time you spend in the market, the better your chances will be. Credit: AFP Photo

Diversification will be your best hedge | A well-diversified portfolio is your best defense against a volatile market. Nobody keeps all the jewels at one place, similar is the case with investments. It is necessary to keep in mind that one doesn’t invest all the savings in one particular fund. Diversity is the key to successful returns which also ensures one has a proper mix of large-caps, mid-caps and small-caps. Credit: iStock Photo

Survival of those who adapt best | Covid-19 has certainly highlighted the vulnerability of even the strongest blue chips. However, it has also shown how adaptable stocks have bounced back. Investors who continue to adapt, will emerge relatively unscathed. Knee jerk reaction to short term trends can be devious as it can lead the investors to panic selling or buying. Credit: iStock Photo

Discipline. And some more discipline | Investors need to understand that ups and downs are part of the investing cycle and that the long term performance delivered by the markets is available to investors who remain in the markets for that long term window. Credit: iStock Photo