The outbreak and spread of the novel coronavirus have impacted almost every sector. The stock markets across the world have been hit hard and have fallen to their multi-year lows over the last five months. The speculations if we are already past the pandemic’s peak or not have further made the markets go volatile.
As stock prices have plummeted to their multi-year lows, investors can pick them up at much lower prices. Thus, the current market scenario is ideal for getting started with your investment journey in equities and mutual funds. Here’s what you will miss out on if you don’t invest now:
1) You Will Miss Out on the Opportunity to Pick Units at Much Lower Prices
It is always a good idea to pick up units when they are available at much lower prices rather than waiting for them to start zooming. By doing this, you will buy more units for every rupee invested. When the markets start shooting up, you will realise more gains if you have more units in your pocket. You are sure to regret if you don’t invest now!
2) Lose Out on the Opportunity to Realise Massive Gains Over Time
Mutual funds and stock markets are powered by compounding. It works best for your benefit when you have time on your side. Now that the markets are down gaining exposure to equities and staying invested for an extended period would be beneficial as you will get the benefit of scale over time.
Compounding is the phenomenon which makes investments surge and magnifies their value over time. It is the return on returns and is invested back into the corpus already accumulated. As you continue to invest, you go on to earn more and more returns over the investment tenure. Therefore, starting your investment journey now would prove to be an excellent decision in the long run.
Also Read: Asset Classes You Should Consider for a Truly Diversified Portfolio
3) Miss Out on the Opportunity to Pick up Value Stocks
As mentioned earlier, the stock prices have touched their fresh lows. There are several value stocks available in the current market scenario. Value stocks are those stocks that are undervalued but have the potential to perform overwhelmingly in the coming days. The share price of these stocks would have fallen regardless of its fundamentals. There would be more value stocks available when the markets are down.
If you are not in a position to select value stocks on your own, then you may consider investing in mutual funds that invest in value stocks. This way, you get exposure to a portfolio consisting of several value stocks across various sectors. With an expert managing the fund, you are more likely to benefit when the markets eventually start rallying.
4) Miss Out on the Post-Epidemic Gains
Going by the past, markets are expected to expand significantly once the COVID-19 pandemic recedes. Here’s how Sensex has performed during and after viral outbreaks in the past:
| Epidemic | Duration | Impact on Sensex | Gains in the Next Six Month |
| SARS | January 2003 – March 2003 | -10.1% | 44.5% |
| Avian Influenza | January 2004 – August 2004 | -12.3% | 28.8% |
| Ebola | December 2013 – February 2014 | -1.1% | 28.3% |
| Zika | November 2015 – February 2016 | -13.4% | 19.7% |
Drawing from the table above, investing now is an excellent decision as the current market condition is conducive. If you have not started with your investments already, then now is the best time to do so.
For any clarifications/feedback on the topic, please contact the writer at vineeth.nc@cleartax.in
Engineer by qualification, financial writer by choice. I am always open to learning new things.
