Investment Approach in Global Crisis

Investing in normal days vs Investing in Global crisis is always different so do with strategy!

Ideally one should not restrict themselves looking into favorite / traditional instruments


Instruments Available

1.Bank Deposits (Fixed / Term)

2.Mutual Funds

3.Equity Shares

4.Fixed Income Instruments

5.Post Office Deposits etc.


Investment Goals

There is always going to be trade off between Risk & Return. The objectives should be very clear whether to Mitigate the Risk or Earn more Returns.


Strategy

Once your Investment goal is clear then you can easily eliminate some instruments while It is always advisable not to invest whole amount in one instrument

I will still stick to the 2 traditional strategies -


1.Bottom to Top approach

This is nothing but analyzing Company / Business first then Industry/ Sector followed by Economy as whole (Country / Global).

In this you always focus more on Micro Economic factors as your study is focused on the particular segment. I will not say you should be prejudicial but generally investors become bias with their choice; resulting into ignoring the facts.


2.Top to Bottom approach

In Contrast to above, we start with an Economy (Country / Global) first then Sector / Industry followed by Company / Business .

By the time you will reach to analyze the business you will be knowing in which direction the economy is moving; This will help to anticipate the Opportunities & Threats well in advance

Investors cannot be rigid about following any of the above strategy.

In the Global Crisis you should look for Top to Bottom approach as it is not a structural crisis, Global economy is in crisis and the cascading effects are going to be there for next 2–3 years

Time to Invest

Covid crisis are not yet in control. The Economic disruptions are yet to be seen and calculated. So I it will be always advisable to be Extra Cautious


Prathamesh 
(27 May 2020)


Disclaimer - Views expressed here are only for Educational Purpose.

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