Financial Planning
pandemic was playing out in #3: Contrarian Investing-
Investing
Lessons
in times of
30
Covid!
T
he topic itself creates a
sense of uneasiness in
our minds & why will it
not as it has been almost two
months that we are in a state
of lockdown. The whole world
is grappling with the problem
of Covid 19 pandemic & is
trying their best to deal with
it. The only solution which
has emerged is of social
distancing which is extremely
difficult to implement in a
free market & open world
INVESTORS INDIA | JUNE - 2020
so “LOCKDOWN”.
This lockdown has thrown
the consumption of all
commodities down the wind
& probably for the first time in
the history, oil prices became
negative, so as all the asset
classes. So the mute question
which comes to our minds
is what strategy to choose to
invest our hard earned money?
- “My basic advise is don’t
lose money.”
But this is easier said than done
as no one wants to lose money,
so let’s focus on some basic
principles of investing-
#1: Asset Allocation- Always
know your risk profile &
stick to your asset allocation,
in any scenario when the
market changes by more than
10%, review your portfolio &
rebalance your asset allocation
if required.
Luv Kumar
#1: Look around & believe
in your instincts- Before you
get down to investing , come
to grips with the broad social,
economic, and political factors
that could potentially alter the
path of an industry. We all
know that the entire world is
interconnected, so some event
happening in Brazil may affect
the US market which may
affect the Indian Market, case
in the point is when nCovid 19
China, we were convinced of
good of GDP growth & were
bullish on equities but now
look around what happened.
So had you figured out what
was happening in china, you
could have saved a lot of
money.
#2: Invest knowing that
nothing lasts forever-Invest
with your eyes on the future.
No matter what we think
today, it is not going to be
true in 15 years. Pick any year
in history, and look at what
everybody was convinced was
correct and then look 15 years
later, and you’d be shocked
and astonished. Look at 1920,
then 15 years later. Look at
1930, then 15 years later. Pick
any year, and 15 years later
everything will be different.
2008 meltdown which is also
known as Lehman Brothers
crisis, it was triggered because
two big housing mortgage
companies in USA collapsed.
Both Fannie Mae and Freddie
Mac were scandals-in-waiting
and were on the verge of
collapse. Similar was the case
with L&FS in India last year,
the balance sheet was so much
over leveraged that any small
trigger was bound to lead it to
collapse.
Those who could use the
opportunity made tons of
money & benefitted from the
downturn.
INVESTORS INDIA | JUNE - 2020
Financial Planning
Contrarian investing is never
built out of thin air. The
trick is not to focus on the
cheap price, but to get the
fundamentals right. A cheap
price alone is not sufficient
reason to invest. If something
is forever cheap, then it has
no recognized value, and the
investment may very well
remain a worthless piece
of paper. Similarly when
market goes up, there has to
be a catalyst, and from an
investment perspective, that
catalyst is change. Whatever
the change may be, it must
have a significant impact within
a country or an industry, and 31
it must also be recognized as
significant externally within
a few years. If the change
is real, others will notice
the improvement, and the
investment will continue to
grow for a long period of time.
So the whole crux of investing
lessons is hire a good advisor
& keep your eyes & ears open
& set your rules before you
start the game of Investments.
Disclamier: Mutual Fund
Investments are subject to
market risk, read all scheme
related documents carefully.
(The opinion expressed are
personal & have no reference
to the organisation I work for.)