With the stock markets the world over plummeting it is natural if you are panicing. You are thinking whether you liquidate and exit now to save something of your investments, or you let your investments ride the COVID-19 with with the possibility of losing everything.
The ĠEMMA team suggests that you follow these two steps during this period .
- Think Twice before you liquidate your investments
- Avoid checking your portfolio every 5 minutes
1. Think Twice before you liquidate your investments
Keep in mind that economies go in cycles – as well as the old adage that ‘what goes down goes up’ holds up most time. The crash of the stock markets is the result of a bolt out of the blue. If you sell your investments you are assured of one thing: the money you will lose between the share price of when you bought your investments and that when you sell you will not recoup. That’s guaranteed. On the other hand there is no guarantee that you will not recoup your loses if you do not liquidate your investments. At some time there will be life after COVID-19 and economies, including stock markets, will start to rebound. The question you must ask yourself is: what is the likelihood that the firms I invested in will be around post COVID-19.
ĠEMMA recommends that you do not take such important decisions in panic mode. Think twice before your start liquidating your portfolio in panic mode. We strongly suggest that before you take such a decision speak to the investment manager who guided you in buying them at the first instant or an independent financial consultant.
2. Avoid checking your portfolio every 5 minutes
Of course you need to check to see how your portfolio is performing. However, even when the economy is doing well, financial consultants advise you not to look at your portfolio daily. Looking at the performance of your investment daily will have you focused on the loses – and the way human behaviour works is if day in day out you see your investment doing badly you will conclude that you made a wrong choice – and it is best if you cut your losses and opt out before these get worse.
The fact is investments are long term. The behaviour of an economy, and very often stock markets respond accordingly, is cyclical – there will be times when you see investment going up and other times when you will see them going down. The odds are that investments will perform well over the long term as, many a time, they rebound and master the negative economic cycle.
Checking daily on your investments under the COVID-19 situation may render you obsessive and may impact your mental health. Rather than doing that we suggest you speak to your investment management for two things. First, ask him to monitor your investment for you you. This is his professional business so he is far more attuned with what is happening in the financial world and what action countries the world over are taking with regard COVID-19. Ask him to alert in instances where decision points are required and discuss actions with him before you decide. Second, discuss with him whether your investment portfolio is well balanced – that is your investments are spread across equity, secured and unsecured bonds, etc. If you investments are not diversified as they should be then discuss with him a strategy of how such diversification will be achieved and the decision points – for example, now may not be the right time to diversify but opportunities may arise as the economy starts to rebound.