Coronavirus: What Does It Imply For Your Investment?

The coronavirus pandemic has been sending shockwaves through the global economy, impacting the finances of people across the globe. But the question that lies here should you worry about your financial future? Here at Wealthface, we would like to explain what you should do in this kind of situation. 

The rapid international spread of the Covid-19 coronavirus and the high rates of infection have spread fear across the world, affecting global economic activity. So, should investors be worried? How can they make sure that the viruses’ fallout avoids their portfolios?

Coronavirus strikes hard on markets.

Stocks plunged this month, as investors sought to decide what impact the COVID-19 coronavirus may have on the economy. A.U.S. recession seems to be increasingly likely, but it’s not clear how extreme or long-lasting it would be if it does happen. The S&P 500 has fallen 35% from its recent high, putting stocks on a bear market (usually known as a 20% or more drop). 

At wealthface, the investment team have made sure to diversify clients’ portfolios in different asset classes and we include commodities like gold and other commodities’ that appreciate in value the last 2 months to spread the risk. This helped us to make sure to minimize the risk which have helped our clients to face the large drop of the market in their portfolios.

In addition to China, the number of COVID-19 cases promoted some countries to take more rigorous containment measures ever. Italy, for instance, had instituted a national lockout. Even in the U.S., officials in some communities have advised people to avoid crowded environments, work remotely, self-quarantine, and other virus-containing measures that can all reduce demand in many industries, beginning with travel, hospitality, and leisure. It has also placed pressure not only on the actual share prices but also on the revenues of potential firms. 

What should Investors do in Volatile Markets?

When you find volatility in the context of the overall, long-term stability of the stock market, then it is not difficult to think of it as a bitter pill. And for long-term investors, this is the best analogy. It’s frustrating to see significant price swings. Yet, in the long run, they are also beneficial. So, what will long-term investors do during short-term market volatility periods?

The main thing to do is not to lose sight of the big picture. Over the last few years, stock-market volatility has been tremendous, at least if presented over historical terms. But two distinct trends are visible, compared to the long-term trend. And, while stock market volatility may be disconcerting, it shouldn’t be so. 

It is particularly true of long-term horizons for investors. It is because common stocks have higher projected returns than other, less risky assets, including fixed income. The higher expected rate of return comes at a price that is (in the short term) higher rates of uncertainty and risk. For this reason, even long-term investors need to be careful about their investments.

What should you Do and Don’t do to protect your investment?

Do create a financial cushion

Since devastating downturns typically follow severe bear markets in the economy, they will wreak havoc on your finances. Retrenchments, wage cuts, or pay-out delays are likely consequences of a sputtering economy. Get ready for the worst. Arm yourself with sufficient protection before you think about making moves in your portfolio. Wealthface always recommends to have an emergency fund 3-6 months of your cost. This way, you won’t have to dip into your retirement funds in a cash crunch.

Do Reassess risk tolerance

Do you think you understand the willingness to take the risk? If you’ve tested your risk tolerance on sunny days, you’re probably misjudged. We appear to be complacent during prosperous times and have mistaken ideas about how much downside we can handle. Finding yourself in the jaws of a bear market will upend any haughty plans about your risk tolerance you might have. It is in this situation that the risk profile will preferably be revisited. It is going to yield.

Do get that financial plan in place

Investing should never be guided by particular moments; over time, it should be a part of a cycle. If you’re like most investors, you’re likely to have accumulated investments randomly for your portfolio with no specified reason for each invested dollar. In the absence of a strategy, there’s a higher chance that during a market downturn, you will make rash decisions about your portfolio. You can end up liquidating long-term investments, which far on the horizon will jeopardize goals.

Don’t try to catch the market bottom

It is the vision of every investor to predict the moment when the stock market hits the end of their downturn period. Nothing is more valuable than getting the chance to complete the recovery. Yet in retrospect, only the market tops and bottoms are clear. If you’re trying to fish bottom — spending money on a perceived low-market — the odds are you’re going to burn your fingers badly. If you skip the exact point when the market hits the edge, it is okay. After the market makes you can place yourself.

Don’t review funds now

Unless you are a daily trader looking at the value of your investments regularly, stop now. Every day finding your portfolio takes a knock that will lead you to doubt your investment choices. You are going to start finding fault in individual bets. Stop checking your portfolio at this stage so as not to shape a misguided opinion.

Some of the equity funds will look like the wrong choice, while the gold fund will look like the best choice ever. You can be tempted to withdraw from the equity and convert the capital to gold, or to stay in cash. At this point, any review you conduct should be solely from an asset allocation perspective. If the asset mix has drastically shifted from desired rates, rebalance the portfolio to its original form. Leave the microscopic review for later.

Don’t change investing strategy, Robo-advisor is the best solution

Do not try your hand at a new approach to investing amid a bear market. If today you’re a different investor than what you were before the bear market began, you’re not doing it right. Investors change tactics during a bear market. They are overwhelmed by fear and likely to abandon years of investment values. For example, investors might suddenly begin to diversify to the extreme, pursuing a focused strategy. This fickle nature undermines the long-term plan that would come into play.

At wealthface, the investment team have made sure to diversify clients’ portfolios in different asset classes and we include commodities like gold and other commodities’ that appreciate in value the last 2 months to spread the risk. This helped us to make sure to minimize the risk which have helped our clients to face the large drop of the market in their portfolios.

Finally, we wish our friends and partners throughout the globe good health in the coming weeks. Remember that long-term investment requires patience; if you’d like to discuss further, your investments and finances get in touch with us. We are always ready to get in touch with you during this critical time and address your questions and concerns.

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