Tips for Investing in the Stock Market during the Coronavirus PandemicSubmitted by Constellation Financial Advisors on May 6th, 2020
May 4, 2020
Now that we’re in the heart of coronavirus pandemic, you might be wondering how to avoid further loses. After all, this crisis will certainly carry on for some time, which increases the chances for massive market devaluations like those that occurred in early-to-mid March 2020. While no one investment technique will protect you during this time of volatility, these following tips can help earn more reliable returns on investment in the new bear market.
Tip #1 – Do Nothing
This may feel counter-intuitive at first, believe me. Doing nothing and watching your stock portfolios valuation slide downwards feels like a death by a thousand cuts. But as past recessions both large and small have taught the experts, selling off a majority of your portfolio at a time like this means you’ll never get a chance to recuperate those losses down the line.
Simply put, dumping Italian or Chinese investments at this time means that you won’t be able to benefit when those countries’ economies rebound in the near-term. Similarly, if you jump ship and move your investments to gold, for example, you’ll find your assets sunk into an investment that pays few dividends during a growing economy. If you do nothing instead, you’ll at least know that you still have worthwhile stocks in hand when the economy rebounds.
Tip #2 – Set an Entry and Exit Time
Of course, one cannot be expected to sit on their hands during this bear market. Some of us have significant amounts of personal wealth invested in the market at this point, after all. With that in mind, you’ll need at least some plan for timing the market when it is wracked with volatility. To do that, you should avoid playing the guessing game.
In other words, you should set a time in which you want to initiate your investment and a time when you want to sell it off. However, unlike during a regular market environment, this timing should not be based upon the current stock price. Instead, you should buy and sell “blind” in one sense. This can prevent you from enduring further loses while anticipating an upturn that may never come.
Using this more rigid method of timing the market may lead to some loses, no doubt. But at the same time, numerous studies have proven that active investors who rapidly change their investments lose out at a time like this. Instead, you’ll be able to prove that old investing adage true – “time in the market is better than timing the market.”
Tip #3 – Don’t Let Volatility into your Head
If you’re feeling the effects of the recent market crash, you’re not alone. Thousands of investors around the world have lost substantial amounts of their retirement investments or mortgage subsidies as a result of this downturn. But even with the stench of loses in the air, you shouldn’t let this trend emotionally drag you down. Not only is that bad for your mental health, but it will also harm your ability to invest rationally later on.
Without question, you should begin to adjust to this new normal. Unless the federal government’s efforts to stabilize the economy work wonders, we could be facing a bear market for a while longer now. But through it all, remain focused on the belief that the market will improve and that you can benefit from that growth, regardless of how much experience you have.
The Bottom Line
These are only the tip of the iceberg when it comes to finding a positive investment strategy during the coronavirus pandemic. So long as volatility remains the dish of the day, you may need to experiment until you can find a temporary strategy that helps you remain afloat.
But regardless of how you choose to do it, be sure to keep your long-term investment goals in mind. Over-reacting during a market crisis like this can put those goals in jeopardy fast. Instead, keep a good head on your shoulders and try to make the best of this difficult time.
*This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel. Neither the information presented nor any opinion expressed constitutes a representation by us of a specific investment or the purchase or sale of any securities. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets. This material was developed and produced by Advisor Websites to provide information on a topic that may be of interest. Copyright 2014-2020 Advisor Websites.