Voice of Commonwealth

What investing lessons did the second COVID year teach us?

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(CU)_Once again, we are entering a new year with the pandemic making headlines, as the Omicron variant of COVID-19 continues to push global fatalities to record levels. However, unlike last year, we are entering 2022 with a better understanding of what the virus means for businesses and economies. Early in the pandemic, many believed that this was a China problem. In the first week of February 2020, Goldman Sachs famously said its impact on global economic growth would only be a “modest hit to annual-average global GDP” between 0.1 and 0.2 per cent. In the case of businesses, the multinational investment bank expected the impact to be limited to “those who had direct exposure to China”. They were indeed not alone in such views, although now we know that these predictions were far from accurate.

Not long after, the pendulum swung to the other extreme and many believed that businesses and economies would be destroyed and were expected stay in deep distress for years to come. This was once again inaccurate, for many reasons, as it becomes apparent that the crisis did not have the power to make such massive changes on a global scale that would have a lasting impact on the economic system. Although Coronavirus claimed the lives and livelihoods of millions of people across the world, businesses and households began to adapt sooner than anticipated.

We have had a two-year parade of experts making projections about everything, only to be proven wrong before they scramble to make new predictions. According to the chief of Value Research, Dhirendra Kumar, in the case of investing, front-running of the event cycle is the worst idea, and COVID has affirmed this beyond doubt.  “The front running of events and news is always a bad idea. Why? Because its main idea is that you need to predict correctly to make money, and if you cannot do so, you must not be expecting hard enough,” he wrote in The Economic Times.

The CEO of the Delhi-based financial advisor noted that as stock markets continue to gyrate to higher, and then lower, before elevating once again, there is no shortage of people trying to figure out what will happen. Therefore, he shared a useful formula for investors after a second COVID year. “Investors who stick to the basics without getting too excited or too depressed will always do well. That should be a simple formula to follow.”

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