19/05/2020
What should a retail investor do NOW?
Greeting to AMM community members, Stay safe.
Let me start this article with one of my favorite quotes
"the time to buy is, when there's blood in the streets." – Baron Rothschild, one of the most successful businessman in history. He told this during world war times, he invested big in real estate and stocks. It was a similar time as today when the entire world is in panic and people start selling and start locking as gold and currencies. A similar case to quote is the success secret of Oberai hotels when everyone sells boarding lodges, Oberai purchased and leased to Army personals. It needs different thinking.
What is Corporatocracy (Corporate + Democracy), it is a wonderful combination, which will ensure an iron wall to protect businessmen and institutions from any economic impact. It could be war, pandemic, natural disaster, the first thing the corporatocracy will do is to ensure the rescue of the corporates, because that is the fuel for democracy and the wheel for entire machinery to keep moving. When corporates say, it is short of funds, do you believe it ran out of cash in 30-40 days of issue, Definitely not. It means they are seeing a risk to their profits planned for next quarter. So, they will share the “potential” loss with their customers, employees, vendors and other possible stakeholders to make sure the risk does not turn into an issue or actual loss. So now you thinking with an investor hat, though it is crude or lacks humanity, for an investor, it is simple, multiple money or makes money to earn money, and literally don’t care how it is made. Like wearing a Marino woolen suite without worrying it is a tender baby goats skin from which the suite is made.
Now you being an investor, how should one think and use this opportunity? First, understand that it is not one problem ie. COVID19, it brought many opportunities, in fact, discovered and uncovered many more ways to seek growth. Though retail investors are weakest in the chain when it comes to the stock market, think beyond it. Yes there are safe and secure alternatives to distribute the investments. When I say this, never quite stocks, stay there within your limits, as the market may bounce back, but not all stocks that fall today. So mark a boundary and distribute your Stock and mutual fund investments among Large-cap, Midcap & Small cap. Also make sure you limit yourself to sectors like Banking, FMCG, Retail real estates, Infrastructure, buildcon, health care, insurance, IT Infrastructure, Logistics, Cold storage, Pharma, etc. and stay away from advertisement, media, entertainment, defense, air cargo, airlines, auto ( with exceptions) , commercial real estates ( malls, theatres, etc.) . Similarly, when Iran and Venezuela started their trade based on Gold, it is not too far for Global trade to look for an alternate to USD. But instead of taking an extreme risk in new-age currencies like bitcoin, Gold is one reliable instrument, which will not lose its shine at least in this century. Retail real estate is another prospective sector, which made many rich men during world war. Yes, when there is lack of cheap labour force, increase in cost of construction material, and no change in demand of retail space to live, like a commercial, is giving up either the business or works space to WFH. It is the culture in India that drives, “Own a Home”, so the demand is not reduced, but the cost is increasing, it the time one should actually Buy and Hold to exploit the profit. But I have personal beliefs on land instead of flats, but there are other constraints. If you manage to get one, without loans, I will recommend a portion of it in Retail real estate. In addition to this we all learned a lesson, that CASH IS KING, so make sure to maintain the liquidity in any given point in time, I will recommend maintaining 1%-2% of your net worth depends on your lifestyle as liquid cash especially in crisis times, otherwise keep in a place, from where it can be liquidated within a week without dependency
The takeaway is it the time to invest and not to panic. Think wise and exploit this opportunity, instead of missing the Bus. Think through, take necessary advice or guidance, but enter and taker position to realize the benefit of this problem. Best wishes to grow your wealth
– Ashok, AMM community
Please share your feedback to [email protected]
