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Right time to build a portfolio in fear of coronavirus crisis


Right time to build a portfolio in fear of coronavirus crisis





While it may seem that the proverb ‘Strike while the iron is hot’ does not fit in the context of the market, its meaning is very deep and relevant. Let me explain!


Lately, all of us as investors have been fairly shaken by the recent market fall, post COVID-19 outbreak. Rather than repenting and licking our wounds, it is time to promptly put a strategy in place to ensure maximum bounce-back in our portfolios. For this, let us revisit historical movements when such an outbreak took place. It would be surprising to know that the markets had delivered comparatively better returns in six months, post the outbreaks of SARS and MERS, which are of the same virus family as is Coronavirus.



This can be seen from the table below showing MSCI world index returns in one, three and six months after the outbreak:


MSCI world index returns(%)

Epidemic
1-month
3-months
6-months
SARS
8.64
16.36
21.51
MERS
-0.29
2.15
8.58

Hence, it is amply clear from this table that pessimistic sentiments are statistically short-lived. 

Having said that, the current Indian Market indices are available to low and cheap.


 
Indices
% returns from 5th  Feb to 5th  Mar 2020
S&P BSE 500
-7.07
S&P BSE Mid-Cap
-7.52
S&P BSE Sensex
-6.64
S&P BSE Small-Cap
-7.51


A plethora of stocks is currently available at rock-bottom prices. Normally, we recommend being during a stock-picking phase and choose stocks as and when a chance arises. However, the present scenario is different. First, the amount of stocks available is numerous and second, the window for the rebound is brief and time-bound. Once the present fear subsidies within the coming months, we'll see a robust upward rally. it might be sad to observe from the sidelines when such an exquisite opportunity passes by.



So, we propose that this is often the right time to rapidly build a portfolio of stocks. That is, strike while the iron remains hot!
Building a well-diversified portfolio in such conditions would help to capture the rebound gains while also curtailing losses, if any, seen within the individual stock picks within the short-run. So, let’s start planning as per the famous saying- ‘Don’t put all of your eggs in one basket’ while ensuring we participate during this opportunity.





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