Coronavirus: Investment Strategies during the Period of Recession

Rajat Paul:

Due to the impact of the novel coronavirus outbreak, Stock markets are on free fall, USA’s stock market index Dow Jones down by 20%, Italy’s stock market index FTSE MIB has fallen by 36%, Brazil’s by 28%, Spain’s by 34%, India’s top indexes Sensex & Nifty both down by 13%.

At the same time, with the sealing of both national and international borders in the wake of the coronavirus terror, the tourism sector will be the worst affected one because all sectors are connected to this directly or indirectly.

Strategies to Deal with the Economic Downturn due to the Novel Coronavirus:

“Be fearful when others are greedy and be greedy when others are fearful", said billionaire Warren Buffet once. As per Warren Buffet, the arrival of recession is the perfect time for investors to invest, because of its two reasons- firstly, stock will be at low price and secondly, in future, stocks will have a better price as days pass. During the 2008 global financial crisis he invested in Mars, Goldmann Sachs, Bank of America, Dow. On Bank of

America he invested $5 billion and within 6 years, he earned a profit of $12 billion.

From these we can understand that, two things are very necessary while investing

during the period of recession: one is strategy other is patience. To check whether we

are purchasing the stock at profit or whether the company is selling the stocks at a

discount we can calculate it by price to earnings ratio.

Diversification of portfolio is another key point that we need to remember while

investing during recession. As narrated by Warren Buffet “do not put all your eggs in

one basket”,  is the perfect note for diversification.

Furthermore, it can be argued that recession, recovery, and expansion is a cycle. After every expansion, it is followed by recession. So investors need to understand that it is a part of the game.

There are various other ways to sustain a recession, such as cutting of unnecessary costs.

No wastage and using every bit of resource to its maximum and refinancing of debt are also other modes which could help one tide over this period of crisis.

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