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Ep #37: Corona and the Bear Market

37, Podcast  Oct 18, 2020

The coronavirus outbreak has proven to be more serious than anticipated. Although the virus itself isn’t new, the current outbreak is a mutated version of it and has spread like a wildfire. As of today, coronavirus has been declared as a pandemic by the World Health Organization (WHO).

The pandemic has not only impacted our lives but the stock market as well. We’re now witnessing a bearish investor attitude, which has led to a significant drop of 20% in the market. It can be said that we’ve “officially” entered a bear market. Although, we still can’t conclude anything solid, as according to experts, you can never know what’s going to happen in the market. The pandemic has taught us some important lessons to hold on to.

The first lesson that came with this pandemic is the vitality of keeping an emergency fund. Many people will lose their jobs or business owners will witness a drop in their earnings in the near future. Thus, these funds help you survive during those tough times for at least 3-6 months, so that you don’t have to indulge in panic selling in the market.

In addition to this, we should also mentally prepare ourselves for the ups and downs in the stock market - and in our lifestyle - as they are inevitable. In the last 100 years, the stock market has mostly gone up; however, there have been significant drops as well so you can look at this as a roller coaster ride. This is the main reason why I recommend investing through mutual funds, as these are portfolios of different firms’ stocks. Therefore, even if you gain in one stock and lose in another, it will balance out eventually.

Final Note:

Although the market is down currently, you shouldn’t worry too much because stock markets are self-regulating entities. If you play it smart like other intelligent investors, you’ll be able to survive this drop without much damage.

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