Should you invest during this Covid-19 pandemic?
It’s been a painful/exciting crash over the month of march. For those who have been following my updates, I’ve generally accumulated cash across the last 2 quarters (2019 Q4 and 2020 Q1), on growing uncertainties and (imo) an over-valued market. I’ve also taken action on my investing plan as follows:
1. Divided my investable sum into three tranches: T1 (20%), T2 (40%), T3 (40%)
2. I’ve allocated T1 and T2 – T1 roughly at the first crash, and T2 about 1 month later.
-T1 into my own portfolio of income generating stocks
-T2 into a professional hedge fund
3. For T3, I’m taking a wait and see approach for further opportunities.
4. The main re-balancing I’ve done across the last 2 quarters was to increase my allocation in cash; so this rebalancing will be the re-allocation of this cash. For my personally-managed portfolio, my best performing stock in my portfolio (21% yield + 100% capital appreciation, story later) went through a merger, so my next step is to hopefully find another gem amondst the ashes.
This means that I am 60% invested, with 40% on hold.
A number of people has asked when to invest, whether the market is going to go down further etc etc. Financial experts (and various articles) are aplenty on both camps, so really, how would I know? But in coming up with my plan, I’ve kept to a few guiding principles and actionable steps in considering what to do.
A. We will never know when is the bottom, but macro-economic factors will generally indicate where the market is moving. This means that *while timing is a factor to consider, it should not lead your investing thesis*.
B. Ultimately, if a company is under-valued, time will tell. Companies with a solid business, strong business sheet, and basically, strong fundamentals, will always weather the storm. This means that *value should still lead the investing thesis*. I picked up my best performing stock (FCOT) after a 2 week confinement for H1N1 then. It’s returned me a 21% annual dividend yield across 10 years, with a 100% capital appreciation prior to its merger. This also means *it is even more worth it to properly evaluate investment opportunities during this period*
C. That said, you can also be smart with timing – don’t catch a falling knife, but ride a rising cloud. The aim of investing is never to try to catch the bottom of the market; the aim of investing is to get the highest reward for the lowest risk . In terms of managing risk, this means a few things to me – *Timing wise, I invest only when the market shows some sign of recovery* and *I invest in traches across a period of time, to minimse judgment errors*. In this case, if the markets rise, 60% of my portfolio will benefit. If it falls, I have another 40% to pick up more.
The 40% is likely to go to a professional hedge fund, but I’ll still be evaluating opportunities for my personal portfolio to hopefully replace stocks I have rotated out of.