THE first quarter of 2020 has so far been described as the most volatile period for the Philippine stock market since the global financial crisis in 2008.
The coronavirus pandemic has rocked financial markets across the globe as lockdown measures shut major economies.
Given the current scenario, how does one manage his stock portfolios during this Covid-19 crisis?
For Marvin Fausto, president at COL Investment Management Inc., how investors respond to market swings like this largely depends on their tolerance for risk.
Is it time to sell, buy or hold?
Fausto advised investors to resist the urge to sell simply because they are scared.
In a webinar, the analyst gave some tips on what investors can do during this difficult time. He advised investors to “buy large, established corporations with a wide range of businesses across different growing industries.”
He said companies from defensive sectors “will be more resilient during this crisis, such as consumer, utilities and basic food manufacturers.”
Fausto also advised investors to “diversify the investments by making sure that the portfolio consists of several companies from different sectors.”
He said one can “take advantage of the Stock Index Funds as the simplest way to diversify.”
Moreover, the analyst said “time in the market beats timing the market.” He said one may use peso-cost averaging and spread the buying over a long period of time.
“Do not panic-sell, especially if the stocks you have are of good, quality companies. And assess your risk tolerance and make sure your exposure to the stock market is at a level you’re comfortable with,” he said.
Careful study of the stock performance is also an advantage when making decisions.
“Evaluate the stocks you own and see if their future prospects remain bright,” the analyst said.
Fausto also advised investors to invest only an amount they won’t be needing anytime soon.
“Stick to your investment plan and you will reach your goals,” he said.
Stocks are inherently volatile and for Fausto, what the market is currently experiencing now is the very nature of it. It goes up and down. As with most cycles, financial markets do recover in time.
Meanwhile, Asian shares were steady in quiet trading on Good Friday, April 10, as trading after Wall Street closed out its best week in 45 years thanks to the Federal Reserve’s titanic effort to support the economy through the coronavirus crisis. The price of oil fell back after major oil-producing countries struggled to finalize a deal on output cuts.
The European and US markets were closed for Good Friday. The Philippines’ stock market was closed on Holy Thursday, April 9, and Good Friday. The long weekend offered a respite from the drama that has wracked markets for weeks due to the coronavirus outbreak.
But stock investors are continuously looking ahead to where the economy will be a few months or more in the future, which largely depends on the state of the coronavirus pandemic and on the mass shutdowns meant to contain it. (With AP)