While the entire world is trying to control the damage by announcing funding and Relief packages, the real answer of this damage lies in Science. The solution to this pandemic is not going to come from economics but from science. These moves can only apply to bandages on the act or could be a pain killer until Science addresses the root cause and finds the solution for eliminating this virus threat. The announcement for 21 days of lock-down is a bold step which will hit the economy but saving the People’s lives is paramount
The solution of this Pandemic can come in either of the following ways
1) Medical science develop a Vaccine
2) We as a Human developed a natural resistance of this Virus
3) It completely disappeared just the way it appeared.
I have complete faith in our Science, as we have solved many bigger puzzles and problems in the past. This too, would also not be a brainer though it will take its time.
On the Market Front, many Investors after seeing Investment portfolio withdrawing their Investments to avoid further losses. After this Market correction, getting out of their Investment many would only seem they took rational decisions.
But, is this the right strategy to follow in such time? Will this strategy work for the benefit for Investor?
See, what the Number says.
If you had invested Rs 1 lakh on 14the Jan 2020.
After seeing this fall, many would-be convinced to sell their investment and save what is left. Losing 38% of wealth within 1-2 months is too much to see and do nothing!
But everyone- whether you are a new investor or Experienced once, should remind yourself that this phase is not permanent. Every Dark night brings a brighter day!
And data support this; I will present the data below:
Remember, Every Boat fights with a lot of waves before reaching its destination. Similarly, Financial freedom does not come easy; before attaining this, you have to face a lot of uncertainties in between.
For instance: Aditya Birla Sunlife Tax relief 96 fund (ELSS fund) given stupendous returns of 100 times. If you had invested Rs 1 lakh in this fund at its inception in 1996, the value of your investment would have been more than Rs 1 crore during this time frame on a NAV adjusted basis.
These years had innumerable panic like situation; like Harshad Mehta Scam, 2000 dot com bubble, 2008 financial Crisis.
Here are some notable crisis market suffered in the past 4 decades.
Do you know what all of these crises have in common?
Market has recovered from all of them- rewarded those who stayed with their investments in all these phases.
Here are the proof:-
These are some of the prominent market crashes and that followed by recoveries in the past. Anyone who stayed with them and faced these phases made remarkable returns with their Investments.
Further, the overlooked fact is that as long as don’t withdraw from your investments, it is only a paper loss, means you see a drop in investment value. But the same moment if you would have withdrawn your investments, this paper losses will become a permanent loss.
For instance: In the 2008 global financial crisis, those investors who had withdrawn their investment after seeing the negative returns during the 15 months of crash would have never recovered from their losses. In fact, they have also missed out on the opportunity that followed in the next few years.
Now, what do you think? Redeeming your investment will save your money in panic like situation. It not only causes permanent damage to your investment portfolio but also take away the investment opportunity that emerges after such these market crashes.
So, the bottom line is, don’t lose hope with this market. These types of crashes we have seen many times in the past. But those who stay put with their investment always turn out to be a winner in this game.