Stick to asset allocation during Covid 2.0

The advice to manage investments through appropriate allocation between debt, domestic equity, international equity, real estate and gold remains evergreen

As Covid rears its ugly head again, I revisit the column published on March 19, 2020. Rumours and fear were running rife as Lockdown 1.0 began from March 25, 2020. I want to reiterate to my readers the advice I had offered then.

Here is an abstract of what I wrote: For one, I am afraid, but not paralysed. In 2015, I had come down with swine flu. I remember the wave of fear that swept through me till a doctor friend calmed me down. He prescribed some medicines and asked me to rest and stay hydrated. I had a reasonably fast recovery, so much so that the only reason I remember the episode at all is because of the diagnosis of swine flu.

Covid-19 is much more contagious. The same doctor friend has told me that given my fitness level, I am likely to survive even if I do get it. But I need to maintain social distancing to not pose a danger to others, including my loved ones. I remain worried about my bedridden elderly father and other senior members of my family, as they are vulnerable, and am taking all measures to protect them.

On the social distancing front, I have asked the entire staff at my boutique investment advisory firm to work from home. The only time I am unable to observe social distancing is during my morning walks in an open ground.

Now, turning to the professional side. In the case of my own investments, I was in the middle of shifting a reasonable amount from debt to equity mutual funds through 12 systematic monthly transfers. I converted these into 12 systematic weekly instalments to benefit from the current slump.

I have given the same advice to my clients, who have all followed it. I resisted suggestions from some of my more aggressive clients to invest lump sums into equity. I suggested the same weekly instalment approach to them as well. I don’t have a single client who wishes to reduce equity exposure, so I didn’t have to do much counselling in this regard.

It takes courage to invest in equities at a time like this. How we behaved during the Covid-19 outbreak will be part of our battle stories. I am preparing my clients and myself to have good stories to narrate. As they say, courage is not the absence of fear; it is the ability to act despite the fear. So even if you are afraid, be courageous. (Abstract ends.)

Personally, I have taken these lessons to heart. We have closed the office down and shifted back to work from home. I have stopped stepping out of my home except for the daily walk. I pray that if Covid visits me or a loved one, hospitalisation is not required. Getting a hospital bed in Mumbai requires contacts at a level that lesser mortals can only aspire for.

On the professional side, the advice of managing investments through appropriate allocation between debt, domestic equity, international equity, real estate and gold remains evergreen. Using the fall in markets in March 2020 to move from debt to equity proved a winner surprisingly quickly. Sticking to the pre-decided asset allocation remains a difficult decision even when equity markets remain buoyant despite Covid 2.0. We are still in the process of making our stories on how we behaved during the outbreak of various Covid versions. Let’s make sure we make stories that we are proud of narrating in the future.

The writer heads Fee Only Investment Advisers LLP, a Sebi-registered investment adviser