COVID-19 - VSRK Capital

After witnessing depressing COVID-19, everyone is glancing with high hopes for a change and entertainment this IPL. Cricket is a religion for a country with diverse population over 1.38 billion. The excitement is pretty much tangible everywhere be it stadium, streets, or homes. Cricket teaches some valuable & relatable investment lessons as well.

“How much do a team needs on the board to win the match” is a process that goes through captain’s mind? And which is very important to make a tough fight. Determining winning score is equivalent to setting and accomplishing financial goals. Smart, Measurable, Achievable, Realistic, and Time-bound are the factors considered to set financial goals. Every keen player keeps a watch on his opponents’ moves. Similarly, keep a watch on your opponents which are real inflation and the volatility.

To win a match, the selection of right team players is vital. Similarly, while investing, every investment avenue has a role in the portfolio. The investment avenues must be chosen considering age, risk appetite, objectives, financial goals, the time horizon before goals shake, and the risk-return feature of the investment avenue.

The cricket enthusiast knows that the strategy changes from one cricket format to the other. Similarly, while addressing financial goal/s, one need to recognize investment objective; the risk appetite; and the time left (balls left) to achieve the foreseen goals.

A good head-start sets the direction of the game and works in favor of the team to win the game. In the same way, the sooner one starts the process of saving and investing, a big corpus can be built advocated by the magic of compounding.

Pacing up the innings as the match unfolds, maintaining the required run rate always. Similarly, for your investments to roar, the earlier one starts saving and investing regularly, systematically, and prudently; with more investment time horizon you can compound wealth better.

Just being a good player is not enough. Following the rules is equally important. In investing, the market factors and volatility provokes. One should be disciplined for the long-term particularly in equities to overcome volatility, and potentially earn decent returns.

Cricket is full of highs and lows. Any captain keeps a ‘Plan B’ to win the game.
Similarly, if any unforeseen financial emergency occurs, one must have a backup plan. Therefore, building an adequate contingency reserve is necessary to deal with emergencies.

Keeping a target, the scoreboard and run rate to defeat the opponent team, and plans a strategy. Reviewing the investment portfolio to ensure whether you are on track to accomplish the goal. Further, it will help to serve in the interest of long run financial wellbeing.

The way the winning of a team can be attributed to preaching command of the captain. Similarly, seeking an efficient advisor who spoon-feed their clients in creating a robust financial plan with a holistic approach.

Cricket is a sport played with a passion to win. With the same passion, focus on accomplishing your financial goals by making prudent decisions. Believe in the magic of compounding and invest for the long-term, a sure-shot formula to win.

Impact of Covid 19 on the global markets

In the past few weeks, the stock prices have fallen drastically and the market saw a downfall of nearly a third of the global market cap. The whole world has been badly affected by the spread of the virus forcing companies to shut down, heavy unemployment and huge downfall in the economy. Almost all major most economic activities have impacted by the disease. The markets have been heavily damaged by the Covid 19 and the effects are visible on the global economic growth. The global gross domestic product (GDP) growth projection for 2020 has halved by the Organization for Economic Co-operation and Development (OECD).

Current Situation in Indian Markets

Although, the market has slightly started to rise slowly such sudden fall in stock valuations and other instabilities have triggered panic across the world and shaken the confidence of investors. The past Friday turned out to be in favour of the investors. In the end, Sensex stood at closed 20% below the peak achieved two months ago whilst other markets which have fallen more.

When the equity and debt instruments were already hit badly, the crude oil war between Saudi Arabia and Russia has only worsened the economic conditions injecting volatility into other assets. Now, the economic tension has extended to currency and commodities market.

Suggested Measures for Ensuring Financial Safety of Investments

Investment professional prefers investment in high performing- financially strong stocks with relatively higher earnings & profitability, solid balance sheets, bigger cash flows, and more effective management should be preferred. At the same time, professional advisers also suggest equity investors alter their portfolio allocation towards large-cap and multi-cap stocks as the market correction might be a little prevalent in the short term.

It might be suggested this is a good time for long term investors to buy high valuation stocks at low levels. For making a profitable investment and subsequent appreciation in the investments value few conditions shall be seen such as high-profit margin stock, low debt and innate capability & financial soundness to sustain even if the share prices touch the rock bottom due to instabilities.

The more-safe investment options might also be suggestible like Corporate Bond funds / Banking & PSU Debt Fund which provide more reliability and trustworthiness in future which seems highly dynamic due to the highly volatile markets.

Tag: COVID-19

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