The COVID-19 pandemic has gripped the world in a way that no one could have imagined. The volatility it has caused in the markets is unprecedented. The markets were trying to react to, not a regional slowdown, but to a shutdown on a global scale.
Many governments, including the United States, did their part to bolster the markets. For example, in the United States the CARES Act was passed, which was designed to give stimulus money to qualifying small businesses and individuals who had income under a set level. The market responded with a rally. However, it was short-lived.
June saw another market rally as the May jobs report was better than expected. Still, with all of this volatility, instability, and public unrest, it’s understandable if a person is a little gun shy about investing.
Avoid a Knee-Jerk Selling of Your Investments
A knee-jerk reaction to watching the market take a dive is to want to sell your assets. Many want to get their money out of the market, especially if it’s invested in sectors that seem to be in a free fall. However, calmer heads understand that with time volatility will ease and the market will respond to economic fundamentals as it has throughout history.
Unless you need cash in your pocket today, think twice before you sell your investments at a loss. If you are patient and you allow the market to recover, you may be able to regain the value and even earn profits on the money that you have invested.
Where Should Investment Funds Be Focused?
Money Morning, an investment journal states that, “Typically, in economic downturns utilities, like water, outperform other investments.”
In fact, Michael Burry, a man who made his fortune accurately predicting the 2008 financial turn down, is said to be heavily investing in water stocks. It makes sense. More than 70 percent of the earth is water, but less than 2.5 percent of the earth’s water is potable. It’s a valuable resource that is essential for life.
Reasons Why Now Is a Great Time to Buy
Liquidity is top on the minds of many investors. People who are concerned about losing their job are more interested in holding onto their cash that they might need for food, rent, and childcare as opposed to investing it. This is a logical way of approaching things.
However, if you are one of those fortunate individuals who has money to invest, now is a phenomenal opportunity. Once the COVID-19 pandemic has passed, some companies are going to come out on the other side a little battered but basically sound.
Their underlying business model will continue to work. Empty coffee shops and airplanes will be full a year from now. Investing in these businesses now while they are undervalued could yield phenomenal benefits when the market regains its footing.
Common sense dictates that you hold onto the cash that you need to cover you in the case of an emergency. That being said, this bear market could be the best time to buy.
Of course, there’s no way to know what the market is going to do tomorrow. Soon, the COVID-19 pandemic will be a thing of the past. But there will always be other disasters on the horizon. Learning how to invest in a bear market could be the key to your financial success.
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June 19th, 2020 by financetwitter
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