Should You Buy, Sell or Hold During Coronavirus Crisis?

The advent of coronavirus across the world has resulted in investors losing confidence in the market. The latest pandemic has been truly terrifying on the stock markets as several indices have fallen record levels. This has made investors cast some doubts over the performance of their investments and have started making decisions abruptly. 

You might be wondering if you should sell, hold, or buy during this crisis induced by the COVID-19 pandemic. Before you make any investment-related decision, you need to look at things from a broader perspective. The current market scenario is not looking good if you are to sell and redeem your investments. 

On selling your holdings, you will end up exiting with losses. Therefore, selling is not an option at this point. After all, why do you want to sell in the red? Now comes the thought if you should hold your investments and see the markets decline further. One thing you must note is that market fluctuations are part and parcel of equity-linked investments. 

The market scenario will never be the same, and volatility is the only constant that comes with your investments. Therefore, down markets should not drive you making the decision of redemption. At this point, you should have a long-term investment horizon to enjoy high returns.

Holding on to your investments will prove to be a great decision in the long run. Equity-linked investments are best suited for investment horizons of five years or more. Like everything else, even investments need some time to provide you with good returns. Therefore, as you gave an extended period of time for your education, you need to give some time for your investments also.

Also Read: How to use your EPF balance during the COVID-19 crisis

Though investments don’t need twenty years, they sure do need some time to offer inflation-beating returns. Considering that, it is only wise to hold on to your investments and wait for the markets to shoot up and enjoy the benefit of scale over time. Also, this is not the only instance of market correction taking place.

Back in the year 2008, the recession which was induced by the subprime mortgage crisis shook the stock markets and caused the Indian benchmark indices NSE Nifty 50, and S&P BSE Sensex decline over 25%. However, they recovered overwhelmingly and recorded their all-time highs at the start of the year 2020. 

During their recovery from 2008 until late 2019, they were affected by the outbreak of several viruses such as H1N1, Zika, Ebola, and Nipah. The indices and markets have weathered the storm and rose significantly. Drawing from the past, investors shouldn’t lose their hopes as all is not lost, and will never be lost.

The current market scenario is temporary and will not prevail. At this point, investors should necessarily hold on to their investments for an extended period as that is the only way of tackling volatility and beating inflation. You might now get the thought of buying more units. 

The current market scenario is ideal to invest as you can pick up stocks at their multi-year lows. Therefore, it’s a good idea to pump in more money to buy more units, and you will see the benefit when the markets start rising. You may invest in direct equities. 

However, to invest in stocks, you need to have market knowledge, if not, then investing in stocks is as good as gambling or speculation. If you don’t have expertise in handling stocks, then you may invest in equity mutual funds. In the case of investing in equity funds, you are not required to do the market research as the fund manager will take care of everything, and all you need to do is just invest!

For any clarifications/feedback on the topic, please contact the writer at vineeth.nc@cleartax.in