stock market investment strategy: Four lessons the Covid crisis teaches you about investing

It was a tumultuous time to say the least – more than for myself, I was overcome with worry for my family and near and dear ones as we heard of one case after another.

While I was wiling away my 21 days of quarantine, too lethargic to even stand up and take a stroll, my mind was in overdrive!

Amidst all this, I couldn’t help but draw parallels between my Covid journey and the world of investing. And I realized that these two couldn’t be more similar! Let me show you how:

Lesson 1 : Don’t PANIC
Just as Covid stormed our lives in a way that we had never seen before, the stock market has time and again shocked investors the world over.

And the first reaction is ALWAYS PANIC! When Covid hit us at home, we were all over the place – sourcing medicines and injections, enquiring for hospital beds and oxygen cylinders, blood pressures through the roof!

Did we really need all that? Probably not. But it is simply human nature to assume the worst.

Isn’t that exactly how we behave during a market crash? A knee jerk reaction to SELL SELL SELL! To assume the worst?

Just like the fear of depleting health extracts all kinds of reckless behaviour, the fear of depleting wealth makes us act in ways we are bound to regret.

Sure, the Great Market Crash of Covid-19 halved investor wealth, but the rally that followed took it to new highs! Market volatility is inevitable, especially in times of crisis.

The best way to tide through BOTH health and wealth problems is to KEEP CALM and ….

Lesson 2 : Consult an expert
In a state of major confusion, multiple courses of treatment mentioned on the internet and a myriad of WhatsApp forwards – the ONLY thing that came to our rescue was an expert.

The minute my close friend and doctor came into the picture, everything became clearer and more organized.

A step by step process of how to go about things, frequency of tests, constant monitoring, diagnosis and at home treatment – I was all better in NO TIME!

Your investment portfolio needs a doctor too. An expert in the capital markets, a financial advisor recommends mutual funds or stocks that can compound your wealth over time.

Consulting a financial advisor can really help bring clarity to your financial plans. With tools like budgeting spreadsheets, financial goal calculators and in-depth market research in their bag, their services can really make a difference to your finances.

It is, however, important to understand early on that an expert can only give you recommendations to improve your health and your wealth, but…

Lesson 3: Discipline is a must
As I got better and the initial trauma of the illness started to fade, I became a little laid back. The drugs had started taking the desired effect and by day 10, I felt rejuvenated.

I began to skip a gargle here, a vitamin tablet there. Until my mother caught my little lapses (God bless her). After a thorough case-taking session, I promised to follow the treatment to the T until the doctor said otherwise.

And I was back on my feet with little or no after-effects in no time.

I cannot begin to emphasize on the importance of discipline during the course of this illness. No remedy is unimportant. They all scientifically target specific symptoms that really helps with a well-rounded recovery.

Why then, should the same discipline not be maintained in your investments? After all, your portfolio’s health depends upon it.

When your financial advisor gives you a plan, ensure that you stick to it. If you had planned to invest every month, DO IT WITHOUT FAIL, irrespective of recent market activity.

Do not try to time your entry points into the market – be the
lambi race ka ghoda! Inject diversification into your portfolio to help it weather all market conditions.

Create a balanced, healthy portfolio that easily recovers from short term market shocks.

And in the words of George W Bush – “Stay the Course”.

Lesson 4 : Review
The last day of my quarantine was an emotional one. When the clock struck 12, I woke up and tip toed to the door of the room I had been locked in for the last 21 days, my heart racing excitedly. The sense of freedom, hope and gratitude I felt was unmatched!

My doctor had given strict instructions regarding follow up tests and recalibration of vitamin doses. She also prescribed a balanced diet and light exercises to regain my strength and immunity. I promised to check with her every few months and inform her immediately of any drastic after-effects.

As new vaccines are introduced in the market, awareness about them and the changing WHO guidelines will help better combat this deadly virus.

Regular check-ups are important for your portfolio as well. While obsessing over it on a daily basis is not healthy, leaving it entirely alone and without reviews is far more dangerous.

The world is on the brink of monumental changes and our portfolios must remain adaptive to them. As innovation and technology change the way we live, our portfolios must be updated to reflect such lifestyle changes.

Life really is your greatest teacher. It’s amazing how one can draw so many learnings from some of the worst experiences in life.

If you’re going through something bad, be rest assured that you will come out of it wiser.

(Neeti Shah is Assistant Manager, ETF & Passive investments, DSP Investment Managers. Views are her own)