While the world has been slowly coming out of the lockdowns associated with the coronavirus pandemic, the virus is still raging and is still causing lots of volatility in the stock market. This may lead many people to take a cautious approach toward investing, especially due to the natural desire to have as much cash on-hand as possible during a crisis.
But the need to invest is still present even during crises, so that you have enough money in the future to retire. With this in mind, here are some valuable tips for investing during the coronavirus pandemic:
1. Invest Inexpensively
During tough times and bear markets, every dollar matters. So, it is important for you to invest as cost-effectively as you can. One of the best ways that you can do this is by using an online stockbroker, as these brokers charge commissions that are far lower than what traditional stock brokers charge.
Online stockbrokers also offer convenience. You can trade with them any time you want. Most of them will also provide you with lots of useful research tools to help you find the perfect investment.
Another way that you can save money is to look for funds that offer low management fees. Because exchange-traded funds (ETFs) tend to invest passively, they generally have lower fees than mutual funds. They also tend to be more tax efficient, helping you further save money.
2. Invest Long-Term
As stated previously, the pandemic has caused a lot of volatility in the stock market, and it will likely continue to do so. This means that you should anticipate that there will be periods in which the stock market will fall precipitously.
But you should not panic and sell your holdings because of this. Over its history, the stock market has experienced many periods of high volatility, but in the long-term it has always generated high returns. Further keep in mind that, if a company has consistently performed well in the past, it will likely again perform well.
Instead of panicking when the stock market falls, you may even want to consider buying stocks. This is because it is at these times that you will likely find tremendous bargains that you may not find otherwise.
3. Invest in Small Amounts and Do It Periodically
At times of great economic uncertainty, it is prudent to keep a sufficient amount of cash on-hand to help you get through these times. But you should still invest, even if you can only invest a small amount of money.
One of the great things about investments is that they tend to compound over time. That is, they snowball in value. Even small investments made continuously over a long period can generate a significant amount of income. They can actually generate more income than large investments made over a short period.
So, invest as much as you can and as often as you can.
4. Invest in Industries Rather Than in Companies
Even in the best of times, it can be difficult to decide which companies to invest in, especially if you are not an expert in business and finance. But in volatile times such as these it can be even more difficult, as individual companies can be highly at risk from prevailing events.
It is often better (and easier) to invest in industries, such as technology or real estate, through the purchase of funds. You can even do your part to help the world repair itself by buying funds focused specifically on socially-responsible companies. You can also simply follow the stock market as a whole through the use of index funds.