How I managed the Covid Market Crash
Disclaimer: This is just my experience on how I dealt with COVID market crash and its aftermath. I am sharing this to provide a real insight into the money I lost and made during the pandemic in order for people to appreciate what is possible.
With that out of the way, lets just start. Since I am an Indian, all these numbers are in Indian Rupees. You can convert these to any currency to get the desired flavour.
My Stocks and Mutual Funds Portfolio then
31-Jan-2020: ₹ 3.65 Crores
28-Feb-2020: ₹ 3.55 Crores
31-Mar-2020: ₹ 2.90 Crores
Overall decline from 31st Jan to 31st March was 75 Lacs or 20%
So what was in my portfolio ?
My Investments (until then)
PMS (portfolio management services): This was completely managed by the PMS so I didn't have any say in the decision making behind this. On 31st March the total value had declined by 35 Lacs or 36% decline in percentage terms in the PMS portfolio.
Mutual Funds: A decline of 40 lacs or 15% in Mutual Funds portfolio. Mutual funds portfolio was completely managed by me so I made all the decisions on this one.
Now what did I do?
Before we get to that question lets ask a more pertinent question. Was I scared?
Oh! Yes! I was absolutely terrified. I had never seen a market crash before although I have lived through 2 of them - 2000 dotcom crash and 2008 crash. At those times I wasn't investing in the stock market. Almost all of my investments were in FDs and Real Estates (Yeah! I was old school). So experiencing this market crash up close and seeing money vanish, as if by magic, everyday was stressful and extremely demotivating.
I thought I had lost everything I had gained in last 4-5 years and I will have to start everything from scratch.
So What did I do?
I did a few things
- I deleted all my financial apps (Kuvera, MoneyFront, Yahoo Finance etc) from my phone
- I stopped subscribing to all the stock related news on Google
- I disabled all stock related notifications on my phone from Google.
- I unsubscribed from all Financial news and Uninstalled all Financial news apps from my phone
But one thing I was determined NOT to do was panic. I did not want to take any decision out of fear or desperation. So I waited. I DID NOT SELL.
May-2020: Market slowly started moving up. I sold 20 Lacs from my Liquid and Debt mutual finds and re-invested 12 Lacs in my main equity funds.
Pundits were still talking about 2nd wave of crash which will be seemingly even worse.
June-2020: I started looking at some of the blue-chip stocks to invest in them directly (apart from my PMS. I was looking to buy stocks which were held by my PMS). Most stocks were trading at very cheap valuations although I had missed their bottom by about 10-20%. However, they were still attractive so I started buying RIL, HDFC Bank, Kotak Bank, Eicher Motors, Asian Paints, Pidilite, Tata motors, HUL, DMART etc at very cheap prices. I bought over a period of few months adding a little at every dip.
This helped me build my own portfolio of stocks. Before this I never invested in stocks directly (except through PMS)
Over next 3-4 months I reduced my stake in Mutual funds which had similar holdings to my stocks. I put some of that money in liquid and some in direct stock investment.
My Stocks and Mutual Funds Portfolio 7 months later
31-Oct-2020: ₹ 4.25 Crores - An increase of ₹1.35 Crores or 46% since 31st March
So What is the lesson here? There are a few
- DO NOT Panic when markets are volatile
- NEVER sell in fear.
- Always buy when market corrects or crashes. It will always bounce back.
- Keep enough money at hand so you can take advantage of market corrections
- If you cannot buy (due to lack of funds) - DO NOT DO ANYTHING. Sit tight.
- Maintain your equanimity - No need to get excited in euphoria anymore than there is a need to despair in a crash
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