Money Money Money: How to protect your portfolio as COVID-19 crisis escalates

Over the last few weeks, the market has witnessed one of the most rapid & fierce falls in recent memory. After a 30 percent decline in the equity market and yields whipsawing in the bond market, fear of the unknown remains constant. There’s no way to predict when this will all end or where the bottom is. But what investors can do is reorient their portfolio to preserve capital, minimize damage and invest in the future.

Yes there will be life beyond corona, so this could be the best time to invest wisely for your retirement, marriage, children and more. Mohit Gang, CEO & Co-Founder of Moneyfront and Ashish Shanker, Head-Investment Advisory at Motilal Oswal Wealth Management are in conversation with CNBC-TV18’s Surabhi Upadhyay.

Ashish Shanker said, “What has been so troubling this time around is that the fall has been very sharp and it has happened in a very short span. We have seen similar falls in the past, but those falls have been far more gradual then what we are experiencing this time around. It has happened because of non-economic reason. So I don’t think anybody saw this fall coming at all and it happened very suddenly.”

He added, “This time people are dealing with the financial fall far more maturely then in the past. A lot of people where equity values are fallen are redeeming, there are some customers who have panicked and who pressed the redemption button, but for them the learning is probably they were not wired to have so much risk in their portfolio. There are few clients who are still saying these are attractive markets and we would like to increase our equity allocation. So people are dealing with it far more maturely so far.”

However, Mohit Gang was of the view, “All those who have seen the 2008 crisis including myself, have not gone through this painful surgery. Like S&P has fallen 30 percent in 15 days, for Indian markets or for any global markets a 30 percent correction has historically taken like good 15 months and this time it has happened in 15 days, so the magnitude and ferocity of correction has been extremely painful for investors.”

He continued, “However, we have seen a new resilience in people who have been invested for a long time. We have seen people coming out gradually in dips starting to invest more, trying to increase their allocation. We have not seen any redemption in our portfolio which are big and massive, nor have we seen any panic redemption. The fixed income market has actually gone through a turmoil. On the equities, more or less investors are mature and they know how to handle this scenario.”

When asked, how investors can corona-proof their allocation, Shanker said, “If your time horizon continues to be about three month plus, then liquid funds many have temporary given negative returns but don’t worry they will come back. In fact going forward your portfolio will accrue at a higher rate of return, so it will compensate because what has happened is essentially the funds have securities where the yields on the securities have gone up and price and yields are inversely proportionate but if you stay invested things will again normalise.

"For corporate bond funds for someone who has come in let us say six months back he may have come in when the yields were 7 percent so the yields have now moved to 8 percent so he is seeing a temporary mark down in his portfolio, which is not very comfortable to witness. But if he is come in with the right time horizon, which is three years plus for corporate bond funds, then he should be fine. He will get the accrual yields what he was locked in at. At this point in time one needs to sit with his advisor or her advisor and figure out what is the quality of the portfolio.”