The mass media and social media are by design not well-equipped to react to slow-moving yet tumultuous events. The COVID pandemic is proving to be unusually problematic in this way. It started as a sideshow in a city in Central China that almost no one had heard of and has now morphed into one of the biggest events in a lifetime. Moreover, even though there are big headlines to be written every day about the cases of the previous day, events are actually moving quite slowly. Sometimes it feels that nothing has changed for months.
Or has it? As I write this page, when I open the home pages of the leading newspapers of Europe, it becomes clear that the transition to a post-COVID state is actually almost as sudden as the previous transition was. There are articles about medical aspects and obviously about how businesses and the economy are going to have a tough time, but what is missing is the sky-is-falling narrative that one would expect. In countries like Italy and Spain, and obviously in Germany, the dread and the fear are gone. There is now a clear way forward.
Looking at countries that are past it, from China to Taiwan to Japan to South Korea to almost all of Europe and much of the US, it's clear that the direct health impact of the virus has a well-defined exit route. Across these countries, lockdowns are over, economies are opening up, and while there are spurts of infection here and there, there is nothing hugely disruptive. India appears to be far from that situation at this point but then so were most of these countries several weeks ago. In any case, it's quite clear that as far as the disease itself is concerned, it's not a permanent or even a long-running disaster that was prophesied till some time ago.
This brings us to what we must start worrying about as investors. As readers of all Value Research publications and my articles would have noticed, we have always had the viewpoint that boiled down to saying that 'this too shall pass.' Not just that, we have strongly emphasised that the COVID pandemic does not suspend or change the basics of investment. In fact, it reinforces them. When times are good and the markets are zooming, you can appear to get away with some bad decisions. But when the situation gets tough, then those bad decisions can cause much more damage.
I'll repeat something I wrote in The Economic Times a couple of months back: Some of my readers say that ever since the COVID crisis started, I've been guilty of repeating the mantra 'stick to the basics' too often. They are completely wrong. I have actually been repeating this mantra for the last 25 years; COVID has nothing to do with it! I hope to keep repeating it for decades to come. And, more importantly, beyond just me writing and you reading about it, I hope that all of us will continue to practise it in our investing.
The harsh truth is that we are in a situation that is quite unpredictable, although less so than a couple of months back. What we do have on our side are time-tested principles as well as our own actions. What will happen in the short or the medium term are unknowns. What we focus on are our own actions, analysing our own financial needs and limitations, and to try and find a path whereby we can come out of this crisis in a reasonably good financial shape.
Even if the COVID crisis is a once-in-a-lifetime exception - and it may not be - it will not be a good idea if treat it as an exception and think that normal, time-tested rules of saving and investing have stopped working