How would I avoid losing money (already invested) during this pandemic (Volatile markets)?
- P Narendran
You can't really devise a mechanism of not losing money. If you get too focused on not losing money, then you won't have that 'opportunity' too. But this is a genuine concern. Many people think about it. I think there are two ways of dealing with it. One is to have a non-equity allocation, which could be utilised to make an opportunistic investment. So, periodically, you should take decision about how much cash you should have at a particular point. If this investment is going to continue for many, many years and if you think that you have invested at a reasonable price in great businesses for some goals due in the next five-10 years, you may keep an eye on your investments periodically.
But time takes care of it. Time takes care of most of the big risks which look like an aberration and these risks are taken care of if you're invested in a great company. For example, HDFC Bank, a company which has grown by providing 20-25 percent annualised return since its inception and many people doubled their money and exited. The money became 10 times and some sold the stocks. It became 20 times, some people sold the stock. But even then, it just kept going up. A lot of people now jokingly say that HDFC is a 20-per cent bank - a 20-per cent rise in everything including stock price returns as well. But even for a stock like this, there have been four or five occasions since its listing when it has gone down by 50 per cent as well. So, in the short run, even a great company could also tank and it is difficult to escape that. Maybe with your cash in hand, you'll be able to use those opportunities. But you need a temperament for that and you also need to be lucky. So, try your luck and it would be a test of patience for you.