How To Manage Your Investments In A Pandemic Outbreak?
Barely one month into the new year of 2020, we have been hit hard by a nasty surprise.
Since December last year, a mysterious pneumonia-like disease has been slowly infecting the people of the city of Wuhan of the Hubei District. Only in early January 2020, it was ascertained that this mysterious illness was caused by a novel single-strand RNA virus, codenamed the Novel coronavirus (2019-nCoV), or better known as the Wuhan coronavirus.
The spread and death counts of this newfound illness rocked the stock markets around the world. We have witnessed healthcare-related stocks showing a sudden spike in share prices while stock indexes and other share prices plummeting, and not to mention the ever gyrating commodity prices.
As an investor staying invested in the stock market, what should you do next facing the imminent threats of a potential global outbreak?
1. Know The Facts and Get The Numbers Right
As of writing, the Wuhan coronavirus has infected 17,387 individuals globally. Out of this, 9,074 cases are reported to be contained within the region of Wuhan, which was the originating place of the Wuhan coronavirus. Percentage-wise, the originating province takes up a total of 52% of the reported cases.
Out of the 17,387 cases, 17,205 cases are detected and contained within borders of China. 99% of the Wuhan coronavirus is reported and currently being treated within China. The rest of the cases of around 1% are contributed to countries from the rest of the world.
From the latest data as of writing, China is taking the full force effect of the Wuhan coronavirus outbreak. And compared to the 2003 SARS outbreak, China has been lauded for being transparent and quickly reactive to curb the widespread of the Wuhan coronavirus by sharing all necessary genomic sequencing of the novel virus while collaborating with top medical personals from countries all around the world as the race for an antiviral cure kickstarts.
As of now, the outbreak is being contained at the best efforts within the Hubei region, as the city of Wuhan and other cities around the Hubei region are being placed on lockdown. Cities all around the world have also beefed up necessary precaution like temperature scanners to detect potential Wuhan infected individuals.
Tip: You can check the real-time data of the Wuhan coronavirus spread cases and death count here
2. Stay Calm and Time To Go For A Bit Of Shopping
Now based on the current situation and a little bit of logical reasoning, as of current it appears that China is taking the effects of the Wuhan coronavirus harder than other countries.
But stock markets around the world have been in jittery mood ever since news of the outbreak. There are plenty of stocks which have seen some major corrections.
So if you have done your due diligence preparation and study, the current market volatility actually presents a buying opportunity. That being said, some companies will face the full effects of the Wuhan coronavirus more than other companies. There will be gainers and losers when an illness outbreak happens.
Know how to differentiate a bargain and a value trap is during these bumpy periods. Is it logical to buy any glove-making stocks before analyzing them? Will the earnings be one-off or will they tag on this incident to grow bigger in the future?
Know the rationale and time frame of buying a company. You might end up getting a good buy from the choppy market conditions.
3. Get Your Plan B Ready In The Event If The Outbreak Becomes A Global Pandemic
As far as we hope that all the best effort has been done to contain the spread of the Wuhan coronavirus, even with far more advanced science and technological breakthrough compared to the year 2003 when we experienced the SARs outbreak, there is still a chance that things could worsen.
The Wuhan coronavirus is a novel virus. Every day scientists and virologists around the world are still studying it, and the virus could mutate to be more contagious and lethal.
In such an unlucky scenario, be prepared to see your portfolio experiencing huge unrealized capital losses. However if you have done due diligence in analyzing the companies prior to investing, you should be confident that either the nature of business of the companies are crisis-proof or have an excellent track record from recovering from global crises.
And it all boils down to the art of managing your cash to investment ratio prudently. Too often investors are faced with a hair-pulling scenario where they have used up most of their cash position by being over-invested, with no “reinforcements” should an unwanted market condition occurs.
Always save up for a rainy day. For it is during a market crash is when retail investors like you and me can fully take charge of Mr Market’s irrational behaviour to safeguard and increase the odds of becoming successful in the art of investing!
Any other tips that you have in mind to manage your investments during black swan events? Let us know in the comments section below!