The investors seem to struggling and looking for safer and attractive bets to smoothly glide through the vexing roller coaster ride of the stock market volatility. The businesses are bedevilled by the marring impact of the coronavirus that has shoved many growth stocks into the abyss. It has created huge clamour among investors. As the confusions become widespread and the gorges are formed in the market stability, the investors look for the expert opinions.
While some pay hefty charges to financial advisories and intermediaries, others take guidance from renowned investors and their style of investing in equity markets. Insights from the business magnate and the CEO of Berkshire Hathaway, Mr Warren Buffet - one of the world’s most successful investors, are often considered as guiding principles for market participants struggling to build recession proof portfolio, modify portfolio mix and cherry pick attractive investment avenues.
It may not provide the direct answers but offers the principles that serve as an anchor to guide our investment decisions. And in the current economic turbulence where every individual is ridden with his own dilemma, adding a personal touch to investment choices is what we might actually need.
The number of virus cases as on 17 April 2020 crossed over 2 million worldwide incorporating more than 150K fatal causalities from Covid-19. Human lives on a mass scale stand threatened, and acting along the precautious needs the governments have introduced stringent lockdown measures impeding several sectors and households, banking and financial space and equity markets.
Taking into account the current turmoil, let us turn Warren Buffet’s pages of wisdom to learn the art of investing amidst the impending financial crisis.
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Being Rational Can be the Key to Survival
The volatility in the stock markets has created huge turmoil among the investors and traders. We acknowledge the stock market taking reckless and untamed swings, making it completely unpredictable. In this respect, Warren Buffet quotes, “Remember that the stock market is a manic depressive.”
We may be witnessing wavering movement of the stock markets, but it is just the intensification of its intrinsic nature. The market runs erratically, and the movement exaggeratedly mirrors every piece of macro/micro news. As we pass through the medical calamity, maintaining sanity and rationality without being side-tracked by disturbing news and rumour remains vital to stay afloat in the turbulent times.
Understanding of the Sectors We are Investing In
Amidst the bearish wave hitting the market, the investors can be tempted to buy highly anticipated stocks making the news headlines. However, before shelling the precious savings and swayed by herd mentality, we need to understand the dynamics of the industry amidst current macro/micro trends and their anticipated future profitability and ability to withstand shocks. The sectoral performance ultimately affects the company and their stock movement.
Not having clear idea about the sectors and how it operates can put you in deep trouble. It is important to understand the sectors trying to tap burgeoning investing opportunities amidst virus outbreak viz- a-viz the threats faced.
Berkshire CEO advises to refrain from investing in the businesses which we do not understand. Besides, predicting performance requires a clear understanding of the underlying business operations and the strategic fundamentals, without which gauging impending risks with the investment becomes very difficult.
Investment in Companies with strong fundamentals
The technical analysis might be disappointing to the point that it would represent apocalypse for the stock market. However, looking back at the history, we can safely believe that this is not the first time when the world encountered such uncertainties. Coping in the face of the bleak future, Warrant Buffet insight stating “In the business world, the rear-view mirror is always clearer than the windshield” can be the guiding star for the investors.
Along with tracking the graphs and the charts of the potential stocks, we must diligently undertake fundamental analysis when we evaluate the business prospects, recent significant activities and past performance of the company as Buffet rightly quotes, “If the business does well, the stock eventually follows.”
Going for Long-term Investment
Amidst the burgeoning uncertainty, stock performance remains an enigma for the traders. Under such circumstances, it can be considered as a folly on the part of ambitious investors who are aiming for sweeping gains in a single day. Concerning the risk of impatience, Warren Buffet mentions about designing of the stock markets prompting money transfer from the active trader to patient investor. And when it comes to bear market, the relocation chances multiply manifolds.
In the face of highly unpredictable scenario for the coming months, the long-term investment appears to be a safe harbour for the investment.
Berkshire Hathaway founder highlighting on the attractiveness of the long-term investment quotes, “Our favourite holding period is forever”. While the long-term investment would provide robust investment solution to the investments, it would help them in avoiding the pitfalls of the current wavering stock market scenario.
Capitalise on the Opportunities
Warren Buffet is known to make money through his investments in the troubled companies. The bear market metaphorically plasters the “Sale Season” on the market. Amidst such price bargains, the opportunities should be timely leveraged.
Buffet suggests putting out the bucket and not the thimble when it is raining gold. Opportunities come infrequently and the utilising the correct decisions to avail gleaming prospects can provide fruitful results in the future. In this context, tapping the opportunities offered by market correction can be considered, carefully analysing the undervalued stocks relatively immune to Covid-19, with strong fundamentals, decent cash position and robust balance sheet.
Amidst the stock market upheaval with Covid-19 unleashing series of economic setbacks, the investment decisions demand well-balanced approach. A single investment option may not be the solution to every investor’s confusion as each individual has different priorities, risk-appetite and investment capital. Under such a situation, the investment insights from the Oracle of Omaha, Warren Buffet can be amalgamated with the personal investment goals to build a fortified profit reeking investment portfolio.
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