Save money despite Corona

Tips to Keep Your Money Safe Despite Covid-19

Putting the Coronavirus in Context When it Comes to Investment

As the stock markets were pummelled in the last couple of weeks, the implications of an intensifying pandemic as well as plummeting oil prices spooked investors far and wide. The downturn is affecting beginner investors who have been enjoying a recovering market as well as veteran investors who are feeling increasingly unsettled.
But, in this tumultuous time, it’s crucial to remember that this is not the first or last dip in the markets. In fact, it may even be the ideal time to get your investment strategy in check. Let’s start by taking stock of what’s happening.

We’ve Entered a Time of Extreme Volatility

On Monday the 9th of March, the stock markets experienced their biggest losses since the economic downturn of 2008. Then, after the WHO declared the coronavirus as a pandemic, the Dow entered bear market territory after a bull market run that lasted 11 years. Considering that we are experiencing an unprecedented global health emergency, this is hardly surprising. But while some epidemics spark market corrections, which is what’s happening now, the impacts could be relatively short-lived. This could even be an opportunity to add exposure instead of panicking and selling.

How to Invest in Uncertain Times

When you’re looking for opportunities in volatile markets, it’s crucial to remember two fundamental investment strategies: diversify and go gradually. Start small and make sure your portfolio is diversified across all the major asset classes and sectors. Times like this may even be ideal to enter the stock market with a view of gauging your tolerance for risk. However, this is not recommended for those who are fainthearted. If you are keen, the four following guidelines should be observed:

  1. Make long-term investments – Ensure that the money you are investing will not be needed for the next three to six months.
  2. Make gradual contributions – By investing a fixed sum on a regular basis, over a long period of time, you will be able to acquire more units while costs are low and less when prices are higher. This is an investment strategy called dollar/cost averaging.
  3. Make use of compound interest – Timing the market is not as important as time in the market. By sticking to a disciplined investment plan, you can earn interest on the interest you are receiving.
  4. Diversify! – Consider investing in low-cost ETFs or index funds that are passively managed to give you a wider selection of stocks.

A Final Word of Advice

While we can likely expect to see further volatility in the coming months, history has shown that markets eventually bounce back. For younger investors with a long timeline to play with, the current dip could provide good opportunities. For experienced investors, it’s probably the best idea to just hold tight and ride it out. Don’t be influenced by your emotions. Unless you need cash immediately, it’s better not to sell assets out of panic. Look at it as a delay in returns, not a derailment of your investment.

Sources:
https://www.cnbc.com/2020/03/16/investing-advice-how-to-keep-money-safe-amid-coronavirus-market-panic.html

Leave a Comment