The world is suddenly put on a tailspin due to the emergence of the novel coronavirus pandemic, which has infected more than 18 million people (and counting) around the world. This global health crisis has impacted national economies, businesses, and people’s daily lives. It greatly disrupted people’s social, professional, and financial situations.
It is still unclear as to when everything can go back to normal. With lockdown guidelines and quarantine in place to avoid exposure to COVID-19, a lot of people have started to look for ways to manage their finances to survive through the pandemic.
Many have since started running their businesses online, took up online classes or training to expand their skill set, and picked up a new hobby to ease their minds off the news somehow.
Meanwhile, some people see this time as an opportunity to learn how to invest in stocks. The stock market is volatile as it is, but the pandemic has brought the market plummeting hard in this challenging time. Some new and professional investors alike view this market condition as not the best time to invest, but others see it the other way around and are willing to take the risk.
5 Essential Tips on How to Invest in Stocks During the COVID Pandemic
To help guide you in your investment decisions, let’s have a look at some tips on how to make wise stock investment decisions during uncertain times like the pandemic you’re experiencing right now.
[1] Educate yourself about how COVID-19 will affect industries. First and foremost, you need to acknowledge that the pandemic will affect all aspects of the stock market. Some of the companies’ stock prices have plummet not because of shortcomings but because of the instability fears people have that drove others away from the market.
Meanwhile, you’ll find some companies that manage to sustain their prices or see noticeable growth in business, such as those that sell medical equipment, cleaning supplies, and food. Take the travel industry and supermarket and grocery stores, for instance; the former has seen record-low demand while the other has soared.
[2] Invest in what you know. Since the stock prices are experiencing a rapid decline, some people were quick to jump in on the opportunity without enough knowledge of what they’re getting themselves into. Investing in companies recommended by investor friends and colleagues can be good. Still, it’s always better to put your money into companies you know very well or are passionate about.
For instance, if you’re in the healthcare sector, you may decide you want to buy stocks in trusted pharmaceuticals. However, if you’re into technology and entertainment, you may look into companies like Apple, Microsoft, or Netflix. Of course, it’s important to do further research first.
[3] Choose the right investment strategy. If you were already investing stocks in reliable companies pre-COVID-19, you probably should hold on. Even when their prices have dipped, you’ll have a better chance of seeing your investments grow over time as they pull through this recession.
Apart from the buy and hold strategy, dedicate time to research and study stock market statistics, the behavior of the market prices, and profitable stock trading strategies, among others, to help you make a sound and confident investment decision. This should help you invest in solid businesses to grow your money
[4] Set reasonable expectations. Before you put your money in companies, it’s important to begin every investment move with realistic expectations in mind. Sure, you can see stocks rising despite the economic repercussions of the pandemic, while some stocks have multiplied over the years.
There will be decades when companies or industries will do poorly, and some that will perform excellently. With stocks, you need to be very patient to see the best results. Growing your money in stocks will likely take you years or decades, not a few months.
[5] Buy low, sell high. As you may already know, the best time to buy stocks is when the prices are low. That’s how you make a fortune. Since the world is experiencing an economic downturn, stock prices are seeing significant dips, but it is expected that stable companies will regain their lost value in the long run.
More Tips for Investing During a Crisis
- Build your emergency fund first. Before you dive into the world of stocks, make sure that you are fully set on emergency savings. You need to be financially stable and ready to invest. Set aside three to nine months’ worth of living expenses for a safety cushion in case of emergencies or setbacks.
- Start small. A lot of beginner investors think that you need a sizable capital to start investing and making it worthwhile. But, even with a small capital, you can grow over time. Instead of starting with a big principal, opt to start small but invest regularly. As months go by, you’ll see how your pot quickly builds up.
- Keep your portfolio diversified. Since it’s hard to predict the stock market’s volatility and which assets will dip or rise during a period, it’s important to stay diversified. Proper diversification allows you to earn returns in one investment even when another is underperforming.
- Stay calm. Media noise and public sentiment can be influential and deafening at the same time. Don’t jump in on trends willy-nilly. If you’re investing long-term, think long and hard before selling amid short-terms events that hurt your investments. Do you think it will have a significant blow on your long-term investment performance or not?
- Get out of debt. More specifically, get out of any high-interest rate debt you currently have. This can pertain to credit cards, which often charge over 20% annually. Even if your investments grow by 10% annually, if you’re paying that amount of debt, then you’re not growing your net worth.
- Keep learning. If, in the future, you see yourself investing in individual stocks and buying aggressively, then you must keep reading about investments. Learning more about the industry and how the market works can help you make wiser decisions.
Wrapping It Up
Having a millionaire mindset, even in the face of a crisis, can help you reach the financial milestones you’ve always dreamt of in the future. While the future seems unclear these days, one of the best things you can do for now is to be prepared when the right time comes.
The stock market has always been volatile and unpredictable. Make sure to keep the big financial picture in mind, and to be prepared for both good times and difficult times.
Adrian Reid is a stock trading educator and the founder of Enlightened Stock Trading. He helps busy professionals achieve financial freedom sooner by creating profitable stock trading systems that suit their personality and lifestyle.
