Strategies to safeguard your Investment during Covid 19

Today, first we will look at some key words of our title and their Oxford dictionary meanings to start our blog. Just to establish the context…

“Strategy: A plan of action designed to achieve a long-term or overall aim.”

Observe how the word “Strategy” is explained using the set of words like action plan, achieving and long-term.

“Safeguard: a measure taken to protect someone or something or to prevent something undesirable.”

Keywords here are to protect and to prevent from something undesirable.

 “Investment: an act of devoting time, effort, or energy to a particular undertaking with the expectation of a worthwhile result.”

Whenever we think of investment it is imperative to understand the term: act of devoting time, effort and energy.

Some amazing keywords to get us started today! Remember the age old saying of “Every calamity brings with it, the equal or greater opportunity.” Currently, Lock-down and the post lock-down phases have brought us a similar opportunity when we are thinking of our investments. There are turbulent phases in lifetime of any investment and as long as one is guided, mentored and hand-held by sound financial principles and advisors, we should still be able to comfortably deal with this scenario.

The story of “This shall too pass...” This is a famous adage that finds its place in many religions of the world like, Hebrew, Arabic, Christianity and Hinduism. Of course, pronounced differently, these four words have a deep, philosophical meaning to the temp-orality of this world. Nothing in this world is permanent, always changing. Same principle applies to our own money and our own investments too. Here is little longer version of the story…

Once a king called upon all of his wise men and asked them,” Is there a mantra or key-rule which works in every situation, in every circumstance, in every place and in every time. In every joy, every sorrow, every defeat and every victory? One answer for all questions? Something which can help me when none of you is available to advise me? Tell me is there any mantra?”.

All the wise men were puzzled by the Kings question. They thought and thought. After a lengthy discussion, an old man suggested something which appealed to all of them. They went to the king and gave him something written on paper, with a condition that the king was not to see it out of curiosity. Only in extreme danger, when the King finds himself alone and there seems to be no way, only then he can see it. The King put the papers under his Diamond ring. Sometime later, a neighboring king attacked the Kingdom. King and his army fought bravely but lost the battle. The King had to flee on his horse. The enemies were following him. And, they were getting closer and closer. Suddenly the King found himself standing at the end of the road - that road was not going anywhere. Underneath there was a rocky valley thousand feet deep. If he jumped into it, he would be finished and he could not return because it was a small road the sound of enemy’s horses was approaching fast. The King became restless. There seemed to be no way. Then suddenly he saw the Diamond in his ring shining in the sun, and he remembered the message hidden in the ring. He opened the diamond and read the message. The message was “THIS TOO SHALL PASS”. The King read it . Again read it. Suddenly something struck him- Yes! This too will pass. Only a few days ago, I was enjoying my kingdom. I was the mightiest of all the Kings. Yet today, the Kingdom and all my pleasure have gone. I am here trying to escape from enemies. Like those days of luxuries have gone, this day of danger too will pass. A calm came on his face. He kept standing there. The place where he was standing was full of natural beauty. He had never known that such a beautiful place was also a part of his Kingdom. The revelation of the message had a great effect on him. He relaxed and forgot about those following him. After a few minutes he realized that the noise of the horses and the enemy coming was receding. They moved into some other part of the mountains and were near him. The King was very brave. He reorganized his army and fought again. He defeated the enemy and regained his empire. When he returned to his empire after victory, he was received with much fanfare. The whole capital was rejoicing in the victory. Everyone was in festive mood. Flowers were being showered on King from every house, from every corner.

People were dancing and singing. For a moment King said to himself. I am one of the bravest and greatest King. It is not easy to defeat me. With all the reception and celebration he saw an ego emerging in him. Suddenly the Diamond of his ring flashed in the sunlight and reminded him of the message. He opened it and read it again: THIS TOO SHALL PASS. He became silent. His face went through a total change -from the egoist he moved to a state of utter humbleness. If this too is going to pass, it is not yours. The defeat was not yours, the victory is not yours. You are just a watcher. Everything passes by. We are witnesses of all this. We are the perceivers.

Well, an amazing story!! Though we can hold off on the philosophical message for this moment (and off-course you can revisit it later) and now focus only on practicality in the story, we have a strategy for COVID 19 situation.

1. Patience is the best strategy right now. Most business owners are working to survive and wait for this tough phase to pass and continue to stay in their business.  The same strategy you need for your investments. - this too shall pass.

Your portfolio may be showing lot of red and it may have come down to original invested amounts wiping out any gains, the better days are surely ahead. STAY INVESTED!

2.  Have an asset allocation – What this means is not keeping all eggs in one basket. It is natural and easy to play safe and move all your investments into bonds and safest options. But, this means that you may not be utilizing the opportunity available. Sound financial advice suggests: to keep certain amount in safe secure investment and certain amount has to be dedicated for growth opportunities. E.g. Currently, pharma companies are showing a lot of potential.

3. Sector leaders change. Just staying invested doesn’t mean much. The times and tides wait for none. The opportunities keep on showing up. Now, is the time to revisit your portfolio and restructure it if needed. And it’s not a one-time activity but should be strategically planned one.

4.  Have your core portfolio  - and a satellite portfolio – Core portfolio is where you have a long term strategy in place and you only tweak a few things to unlock it fully. Whereas, another wiser approach would be to have a satellite portion of portfolio too. This is the part where you will take short / medium term tactical calls. This will give you some alpha (leverage and addition) in overall returns of your entire portfolio.

Well, COVID 19 has been a tremendous global impact event… It has literally shook the foundation of entire humanity! Obviously finance and economy are impacted as badly as anything else. But, with the trend already showing upward curve and businesses slowly resuming its routine with the “new normal”, we should be optimistic and opportunistic to capitalize on the India’s Growth Story!!!