The coronavirus bear market might look appealing to some. But for many, the economic changes that come with COVID-19 cause anxiety and uncertainty. Investing during coronavirus, when you can buy stock or other assets for lower prices, might sound like mathematical sense, but is it right for you?
Start with the information below—and the advice of your financial planner—to make an educated decision for yourself.
A Look at the COVID-19 Stock Market
The stock market took a beating as the coronavirus began to sweep across the US. On Feb. 20, 2020, the Dow Jones Industrial Average was 29,219.98 points. By March 23, 2020, it had dropped to 18,591.93 in an extreme slide downward related to the pandemic.
But even as the Dow continued to drop, economic experts were warning people not to panic with their money. Peter Mallouk, a chief investment officer, said he was worried people would make irrecoverable mistakes by using emotion- and fear-based decisions in managing their portfolios.
And in fact, the Dow did start to climb again, reaching as high as 23,949.76 on April 14, 2020. While it’s likely to rise and fall throughout the pandemic, economic experts predict the stock market will eventually rally.
Some Reasons a Rally Is Likely
Nothing falls forever. Eventually, the economy will begin to rise again. Consumers are eventually going to hit the market with enormous demand.
According to MarketWatch, the economy in the US is about 70% driven by consumer culture—the buying and selling of goods and services. During the coronavirus quarantine, many people have been stuck in their homes or limited in how they can shop, dine or recreate. Once stay-at-home orders are lifted and people start to get back to a new normal, there’s likely to be a huge spike in spending.
MarketWatch also predicts that changes in supply chains and money from various economic stimulus efforts will continue to stimulate the stock market. While no economic future can be 100% predicted, historical trends support some of these predictions.
Should I Invest During Coronavirus?
But an eventual rise in the stock market isn’t a free pass to go all in. Investment adviser Ric Edelman says knowing how to proceed according to your own situation and needs is important. Regardless of what the economy might be doing right now or in the future, understanding your own financial goals is the place to start.
First, consider how long you have to regain lost wealth or build new wealth. Someone who is on the verge of retirement or already retired may not have the time it takes to wait for bear market investments to increase in value. Older adults might want to stick with low-risk investments or savings accounts that maintain what wealth they already have.
Next, consider your current financial status. “Buy low, sell high” might be the prevailing wisdom among investors, but it only works if you have the money to buy with. Many families are facing loss of income or jobs right now, and it might not be the time for investing. Instead, it might be time to work on your personal budget and negotiate with creditors to reduce expenses, at least temporarily.
Finally, consider how risk adverse you are. No investment is a sure thing, but some do come with more risk than others. Understanding what you can afford to lose helps you determine which types of investments might be right for you.
Investing During Coronavirus: Where and How?
Ultimately, only you can decide if investing during coronavirus is the right move for you. Once you make that decision, though, you have many options to choose from. Here are just a few possible investments that might be right for you.
- Buy stocks that have dropped enough to make them affordable but are for companies that you feel will weather the storm and come out swinging after the pandemic.
- Invest in companies that have enough cash. Most expert-level investors are still looking for opportunities, but they’re being picky and opting for companies that have strong cash flow and stable balance sheets. Now isn’t the time to make big gambles, especially if you’re not young enough to recover before retirement.
- Consider investing in real estate, which historically has weathered recessions and global economic crisis better than many other options.
If and how you invest is a very personal decision—and always a big one. It’s a good idea to seek help from personal financial advisers or other wealth management professionals even in good times. Consult professionals for help understanding the best ways to support your wealth-building goals if you decide to invest during coronavirus.
Other Coronavirus Support
Coronavirus has impacted more than just our investment opportunities. If you’re worried about other money or credit questions at this time, check out our COVID-19 finances guide. From keeping eyes on your credit to what to expect from stimulus packages, Credit.com has information to help you plan and manage your money during this time.