Equity mutual funds are down almost 20-30% from last high. Most people still want to directly invest in stocks for long term. All the salaried persons under 30s are seeing this as a lifetime opportunities. Lets see where to invest in this economic disruption.
There are lots of choices for investment but the question is where to invest in this economic disruption. The answer according to the expert is that the equity is still the best option but no one can time the market so start in buying in chunks. When market will turn up and economy will start recovery then no one will be notified. When a stock drops 50% then it has to climb 100% to regain the same position.
What should be bought
Stocks of the blue chip companies in India like HDFC, HDFC bank, Maruti, Bajaj Finance, Hero motocorp, HUL, ITC, Ultratech, Asian Paints are down almost 30% – 50%. If someone has the demat account then he can buy these shares online for 3 to 5 years but this is not a recommendation. It is just the list of blue chip stokes and there are many. Some people prefer to bet on sectors so there sectors like pharma and consumer goods which are likely to out perform is such pandemic situations. Dow is hitting lows like never before.
People who does not have the demat account
Those people who does not have the demat can buy the mutual funds without being worried of tracking stocks. Currently mutual funds are also down almost 23% to 30%. There mutual funds will have to 30% – 40% up to match their previous gains. People who invested 3 year back are having 0 or negative returns this time. Economy was already facing slowdown since 2 years and now this pandemic has made the condition worse. Hopefully economy will recover and regain its position.
This is one of my favorite mutual fund which is 23% down currently. Axis long term direct growth ELSS fund. It used to be giving 18% CAGR return and here you can see the bleeding.
The Pandemic effect on economy
IMF has already warned under any scenario, global growth in 2020 will drop below last year’s level. Covid-19 has shut the economy of most of the countries. Government are announcing big help packages and central banks are giving rate cuts to support the economy. These steps are so helpful that if Corona fought well then it is obvious the economy will recover sharply.
There is no easy way out of this crisis. Once the virus is controlled then the people will be so poor to life that they already had. So government will be supporting them by giving money, food or jobs either way. Now the winner is the only country which stops controls this pandemic soon and start the industries again also reduces the unemployment rate again.
I have always been saying to the newcomers in the market that don’t see share market without wider perspective. Always think about the economy first if you are the long term investor.