The Novel Coronavirus is slowing progressing in to a global epidemic situation. AlJazeera news magazine confirmed that there are around 100,000 confirmed cases of Coronavirus around the world as of March 2020. The website also notes that there are over 3,000 deaths in China, ground-zero, and over 260 fatalities in other parts of the world. This global scare has a major impact on business, as many trade trips to China, world’s manufacturer, have been halted. Major precautions are being taken in other parts of the world to minimize the spread of this virus.

As a result of this pandemic situation, stock markets around the world have been effected. Investors are reluctant to tie in their money in stocks with the assumption that business will be affected due to this global trade slowdown.

The latest news on the stock market front being; London’s FTSE 100 share index fell more than 3%, The Dow Jones Industrial Average opened 2.7% lower and closed over 970 points at Friday closing, Japan’s Nikkei 225 (N225) led declines among Asia’s main indexes on Friday, closing down 2.7%. South Korea’s Kospi (KOSPI) fell 2.2%. Hong Kong’s Hang Seng Index (HSI) dropped 2.3%, and China’s Shanghai Composite (SHCOMP) declined 1.2%, Germany’s DAX (DAX) was down 3.5% and France’s CAC40 (CAC40) was 3.6% weaker. (Sources: TheGuardian, BBC, CNN)

It seems like panic has taken over the stock markets all over the world…

What is Your Recourse on Investing Amid Coronavirus Scares?

It is important for you to have an understanding of your situation in the stock market amidst this chaos. Whether you are an dividend-growth investor or a day trader, you will most likely be affected by this pandemic situation around the world. However, it is not the time to panic.

If you are an investor looking for long-term gains and yearly dividend pay cheques, chances are that you can relax a bit. The dividend payment is based on company performance and until such time, the Coronavirus hits the actual profits of the company, you will be okay. So ideally it is advisable to hold on to your shares.

If you are a trader in the stock market, chances are you are highly affected. All these fluctuations in the market, and most of them being a long-lasting downwind, you might be stuck with your portfolio. You will only make a loss when you sell your stocks at a lower rate than the price you purchased the stocks at. So if the markets are down, it is still advisable to hold on to your stocks, unless you have a liquidity issue.

Averaging Down During Market Drops

A market on the downswing is also an opportunity to bring the average cost of your shares down. For an example; if you have 100 shares of company A purchased at $100 each, your total investment in company A would be $10,000. If the stock currently trades at $60 in the market, you have three options to consider.

You could sell your shares at $60 each and make a loss of $4,000. Or, you could do nothing which would not change your portfolio value. Finally, you could buy more shares at $60. Let’s assume you buy another 100 shares at $60, investing $6,000. Now your total investment in company A climbs to $16,000 with 200 shares. If we average the cost per share now, it would be $80 per share. So if you are an investor, you have more holding of the company, thus ensuring more dividends. If you are a trader in the market, you have a lower asking price for your stocks now.

However, using this averaging down method as an investment or trading strategy depends solely on the investor. Other factors to be considered in such a situation are company outlook, market outlook, economic stability, etc.

Whatever said and done, do not panic when dealing with the stock market and during short-term fluctuations, look for long-term strategies.