Coronavirus Outbreak: Should You Dump Stocks in A Market Downturn

  • Mar 16, 2020 AEDT
  • Team Kalkine
Coronavirus Outbreak: Should You Dump Stocks in A Market Downturn

Currently, when the whole world is battling with deadly Coronavirus and is trying to contain the damage caused by it, investors are worried whether they should keep their money in equities or not. The equities market all around the globe has taken a toll due to the coronavirus outbreak. Each passing day, markets are witnessing record low figures due to the widespread panic among investors.

No sign of Relief in the Equities market

Although the impact of the virus has not been determined, by looking at the steps some of the major economies are taking, it can be said that there are high chances of a market crash. Despite authorities taking all measures to improve the situation, no relief has been observed in the market. Recently US Federal Reserve took a bold step has trimmed down its rates to near zero to prevent the financial market. This unexpected move by

A couple of weeks back, Australian central bank- RBA reduced to 0.5 per cent to boost demand and to offset the tightening in financial conditions. Despite this, the Australian benchmark index- ASX-200 has gone down by several percentage points in the past few days. Today, by AEDT 1:21 PM, the index was down by around 8%. This is a very big single-day fall.

Is there any undervalued Opportunity?

When famous investor - Warren Buffet was once asked about his company’s investment strategy, he had stated that:

- “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful”

In the current challenging climate, many investors want to know if there are any undervalued opportunities. The health crisis, the coronavirus had created, has caused the demand for the essential and nutritional product to rise substantially. As a result of this, consumer staples, particularly nutritional products companies have been receiving increased attention from investors. It must be noted that many consumer staples companies are facing issues due to the disruption in the supply chain of products.

In difficult times, investors are always advised to trust their portfolio as many a time short term losses are overshadowed by sustainable long growth. Hence, investors should rather select a diversified portfolio of stocks which are looking safer in the current climate, rather than dumping stocks in the market downturn. One needs to understand that things do not always go as planned and therefore investors should develop an appetite for short term losses.

To Know More Read: Four growth stocks to look at in the Current Scenario

Have we overreacted to coronavirus fears?

When the outbreak started in China, it caused many plants and factories to shut down. Even retail stores of many luxury brands were closed. Although it impacted the business and operations of several global and domestic companies, the stock markets were not that much impacted at that point of time.

The problem started when the news of spreading of the virus came out. This created a worldwide panic causing investors to withdraw money from the market. Equity markets were worst affected from it and they continue to get impacted till now. Although central authorities all around the globe have interviewed to sustain the damage caused by the virus, the outbreak has not stopped and is spreading at a high rate. Authorities have also brought measures to product from financial crisis, but, the global securities continues to get impacted causing widespread panic.

There could be a possibility that investors might have overreacted to coronavirus fears, causing some stocks to go down as much that they might be undervalued right now. Investors must take a close look at the stocks which are trading at record low levels.

“It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price” – Warren Buffet

To know more, click here: Three Diversified Stocks Trading near to their 52- weeks low prices - CPU, SM1, CIM

This too Shall Pass

At some point in time in the future, the effect of the virus will come to an end, and then the world economy will be supported by measures which have been recently introduced by the central authorities.

Warren Buffet once told that the right time to get interested in stocks is when no one else is. Right now, investors are needed to plan their investments in such a way that when the dust settles, they should have something to hold on to. Dumping stock right now won’t be helpful now or will it benefit in the future. If done cautiously and carefully, investments can still provide relief to investors.

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