15 May 2020

8 tips for investors of stock market during covid-19

By DICC Institute

The coronavirus pandemic is also putting investors to the test to act rationally and coolly and to make the right decisions in their investments in stock market. We have created a guide with the most important to-dos in matters of investment.

The volatility in the markets following the coronavirus pandemic has been a headache for many private investors and professionals alike in recent weeks. In such a phase, it is important to keep calm and not make any major corrections in order not to incur even more losses through sales. Those who have done their homework and are looking towards a long-term investor need not fear the corona pandemic.  During lockdown one can also go through a professional stock market course in delhi .

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Tips for Investors during Covid-19

#1. Avoid hasty actions

The fluctuations on the stock exchanges were sometimes very rapid, and the resulting distortions affected all asset classes. In situations such as fighting Covid 19, it can be dangerous to act short-sightedly based on emotion. If an investor issues an order with high volatility, it is like playing with fire. Because in such a phase, market indications and actual execution prices often differ greatly from one another.

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#2. Quality should be paramount

Many advisors recommend buying cheaply in the current situation on the stock markets. In fact, many companies were cheap to buy, especially in March. Still, I can’t sign it like that. Inexpensive does not mean good, the quality question can only be answered after thorough analysis. Investors have no time for this in periods of panic. I also think it is dangerous to buy ailing sectors such as aviation or financial stocks cheaply.

#3. Resist the temptation of the “optimal” entry point

Most private investors fail when trying to achieve the ideal market timing and make the right entry point in order to later benefit from the highest possible price rise. What is generally not very promising works even less in highly volatile times with strong daily fluctuations.

#4. Keep companies with long-term potential

It is advised in many places to dispose of depot corpses. This advice has its justification: It is perfectly appropriate, especially in times of crisis, to sell shares in companies of which one has not been convinced for a long time. However, selling stocks because they perform poorly at a certain point in time should not be a motivation. The long-term potential of a company is more important than the market value.

#5. Focus on longer trends

A long-term orientation ideally goes hand in hand with investments in future fields. Megatrends such as health or digitalization will last longer and survive crises if not even aggravate them. Companies operating in these areas have great growth potential. Generally speaking, growth stocks are currently still preferable to value stocks, as many companies are currently not paying dividends anyway, which is the main advantage of this category of stocks.

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#6. Adjust the share proportion to the personal risk profile

Those who had too little equity exposure were well advised to get in and increase the equity quota. In the long term, there is still a lot to be said for this asset class. Those who already had a large share of shares were well advised not to get out, but to go through the panic phase on the stock exchanges. In this case, an increase in the risk is not necessarily indicated. Under no circumstances should the iron reserves be brought in, since the situation on the financial markets is still quite fragile.

#7. Monitor developments in government bonds

Government bonds have proven to be a safe haven in the Corona crisis. They were able to generate positive earnings. Central banks have recently struck vigorously and bought government bonds. Having bonds in the portfolio makes sense. This is the only way to make investments in a long run and can make profits, but they do give low –profit ratio. However, it is now necessary to monitor how the asset class is developing. Numerous countries will significantly widen their budget deficit due to the measures against the coronavirus pandemic. Higher debt levels are also not a sign of increasing stability among states.

#8. Continue to focus on diversification

Diversification should be a basic principle of every investor that you shouldn’t throw overboard, especially in stormy seas. In the initial phase of the crisis, the high degree of diversification had a noticeably soothing effect. In the meantime, there were also distortions in conservative investment instruments – this was due to the great need for liquidity. In the meantime, the risk-reducing effect is working again, because with diversified portfolios you drive in relatively calm fairways. Anyone who invests in the long term is well advised with a broad mix of stocks. Even if companies with technologies for video telephony or pharmaceutical companies, for example, currently have a lot of wind in their sails, you shouldn’t put everything on one horse.

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