Most people from the world of investment would tell you a single thing — there’s no time to start investing like the present. However, if we’re being realistic — the age of the coronavirus has shifted the global markets and stock behavior. That’s why having the proper investment strategies during the pandemic is crucial — you don’t want to be caught unprepared by any abrupt changes. With this in mind, we’re going to go over basic investment behavior during the COVID-19 crisis.
If you’re someone who’s a beginner in investment, there’s no reason to delay your entry into the exciting whirlwind that finances are — as long as you have a reasonable approach. For example — you don’t want to spend any money until you’re absolutely certain that you’ve got a basic grasp of the financial instruments that you’ll be dealing with. Your expectations need to be in check and within reason, regardless of what stock you want to invest in.
For instance, successful companies like Netflix and Amazon have had their stock more than triple in value over the course of the previous decade — but this is not a strict norm, and there’s nothing that guarantees their success. It’s far from a straight line, and there are many factors that determine how stocks will fare. Over the long term, it also depends on how much the stock market attracts value in general. The best results come from patience — you should expect to make a fortune by buying and selling stocks over the course of decades, instead of years or months.
Being ready to invest is more than just about knowledge and mental preparedness — you also have to be prepared in practice. And that means setting up an emergency fund that will cover your own expenses. We’re talking about up to nine months’ money for usual living expenses, that will cover you losing your job or being prevented from working due to hypothetical health issues.
These things may not seem likely, but it’s always good to prepare for them in advance — you don’t know when something can happen, and if most of your funds are tied up in investments; pulling out won’t always be simple and easy, depending on your liquidity.
Not all debt is necessarily a bad thing — but debt with sky-high interest definitely is. For example, that’s your credit card. With these, you may end up paying 25% worth of a fee on a yearly basis. This is a problem if you’re looking to build an investment portfolio — depending on how large your investments are, if your annual debt fees are 20% while your investments give you 10% in the same period, your overall worth might actually be shrinking.
Comparatively, low-interest credit such as mortgage debt isn’t nearly as bad in this context.
Now, how do these things change during a pandemic? And how does a global environment with a huge health issue influence your chances of earning money through investment? If you’re just entering the stock-trading scene, these are all things that interest you.
Well, for starters, as most people could predict — the first wave of the pandemic caused a huge stock market crash. If you take a look at the ten most stable stocks on NASDAQ, you’ll find that all of them dropped by at least 10-15% in March 2020. However, this is simply the sign of a market shocked by the sudden burst of the pandemic; in most cases, it’s not a predicament of the companies themselves. In the span of weeks, most of the stronger companies managed to regain the worth that they’ve lost.
Industry giants like Amazon even saw their shares raised to a record high; though this is pretty understandable, as the quarantines caused by the pandemic saw people ordering more stuff online than ever before.
With all of this in mind, there’s still one crucial matter to keep in mind — your emotions have to be completely in check. This is a trait that’s generally something excellent for any kind of investment you can make at any time, but at particularly volatile times it’s even more important. If a sudden dip happens, don’t allow for panic and fear to guide you into selling the stocks of companies that are generally growing, healthy, and unlikely to be affected by the pandemic in the long term.
Additionally, for people who believe that they’re too nervous to begin investing in such a stressful period; you could always wait for things to calm down. Sure, it doesn’t seem like COVID-19 is going away any time soon, with no vaccine appearing before 2021 in the earliest; however, as with all other aspects of modern life, the markets will eventually adjust to this new reality. Should the coronavirus situation persist in the next year or more, new waves of the pandemic won’t make such a huge splash in the financial markets.
Play When You Can Lose
At the end of the day, there’s one investment strategy that you need to pay heed to regardless of whether there’s a pandemic out there or not: don’t invest any money that you’re not prepared to lose. Or, rather, make sure that you won’t need that money in the next five years or a decade. Trust us, while sometimes selling stocks during a market crash can be the only course of action, it’s not something you want to be forced to do.
If you’ve got nerves of steel, investing during the pandemic can be a good opportunity — but never lose sight of the big picture when it comes to financial markets, and be prepared to weather the storm without losing your livelihood and savings in the process.
We hope that this guide was useful to you and that you now feel more confident about the investment strategies that are best applied in the time of a pandemic. Most of all, make sure that you are staying safe in these times we are going through. Have a good one, guys!