Investment Lessons Learnt From This COVID-19 Crisis

As the COVID-19 outbreak gets more serious, this had caused a significant impact to the worldwide economy. Last week, we just saw the stock prices of REITs falling as much as 50 to 60 percent. My stock portfolio was not spared either. I have sold off The Hour Glass and Kingsmen Creatives earlier this month. I have bought Singtel and OCBC Bank at prices that I deemed attractive. The stock price of Singtel and OCBC Bank continue to fall and I believe no one knows how far the knife will drop.

Below are the lessons that I have learnt from this COVID-19 crisis.

  1. Have a war chest ready for such crisis.
  2. Deploy your cash in Tranches instead of throwing all your monies into the stock market all at once when the stock market crashes. Pace your purchases as well over a few weeks. We have seen the Straits Times Index crash multiple times within 2 weeks. It is very hard to predict or catch the bottom.
  3. Allocate your cash into a few stocks instead of a single stock. Certain companies recover faster than others. By allocating your cash into multiple stocks, this spreads out the risk should 1 out of the stocks you chosen fails to recover from the impact of such crisis. Example, if I have 10K, I will buy into 2 stocks, 5K each.
  4. Train your mind psychologically to follow your investment plan. Most of the time when market is good, we keep buying. When market crashes, we stopped investing out of fear. I believe that a good company will recover faster than the rest when the current crisis is over.
  5. Lastly, do not invest everything. Allocate cash for daily living in case the crisis turns out to be longer than expected.

5 years ago, I read this book titled “The Warren Buffett Stock Portfolio“. There is this quote inside the book that was from the letter that Berkshire Hathaway send to shareholders in 1990 which I felt is meaningful during this crisis.

Even though we had bought some shares at the prices prevailing before the fall, we welcomed the decline because it allowed us to pick up many more shares at the new panic prices.

Berkshire Hathaway shareholder letters, 1990

Keep calm and continue investing!