You would think that the market isn’t thriving, but there is always space for making profitable trades if you know when to act. The world seems like it’s been put to a halt, but that doesn’t mean it’s not progressing. Many big tech companies are thriving this year, and you can’t ignore that. The future depends on technology, after all. We are heavily relying on technology, especially during these times: whether it be finding the cure, contacting your loved ones when you have to be apart, or working from home because you have to take care of yourself.
However, investing during the pandemic is not that simple, which is why we have advice that can help you reevaluate things and put into perspective how to act. There are many different aspects to it: money management, considering what kind of trader you are, and ready to change something if you see that you are impulsive (which is not the best if you are into trading).
Assuming you have some savings, why should you invest them, rather than leave them in a bank or a mattress?
- Money loses value over time. This is the basic principle of inflation. The same amount of money today will not buy you the exact value of goods/services in a year. Therefore, you need to find a way for your money to “grow” at least at the inflation rate, to remain net neutral or above the inflation rate to grow your savings!
- Interest rates are at ultra-low levels, with some central banks even experimenting with negative interest rates. This means that if you leave the money in a bank, it will lose value in addition to the inflation rate if you have negative interest rates.
Value of assets
But, if you can’t just leave your money sitting in a bank account, what should you do? The value of “safe” debt like government bonds will probably be deficient due to low-interest rates. And if you don’t have enough to invest in a property, that leaves stocks as the asset class of choice.
The world is in a crisis; why invest?
The world is not ending. Even though the stock market occasionally looks like Carrie’sCarrie’s ending, that might be the best time to invest in stocks. One of the seemingly eternal truths is that after a fall, the market will start going up again, and it will eventually surpass the value at which it tumbled. Even in the Coronavirus crisis, investing in stocks is an excellent way to get ahead.
Investing in discounted stocks is a good idea if you have a strong foundation that leads you to believe that the stock is undervalued. This can be laborious and time-consuming and require significant expertise to figure out for individual stocks. However, if you still want to invest in stores, but do not have the above requirements, do not despair!
The easiest way to replicate the success of the market is to invest in indices. An index is a collection of stocks selected to represent a specific aspect of the economy or the stock market as a whole. If you’ve heard of the S&P 500 or the DowJones 30, these refer to some of the best-known indices on the NYSE.
When you invest in an index, you are betting that the index will go up and, therefore, that the overall economy or sector of the economy will do the same. Indices are useful as they diversify some of the risks since they are composed of many different stocks. This way, some stocks might not grow as much or may even lose ground, but the overall index could still be green.
If you do not want to be a news addict and try and predict how a few select stocks will perform, calculating with the odds in the market, but still want to protect your money, index investing in stocks will prove to be the best passive strategy. This strategy will allow you to count on the overall economy (or a sector) doing well, without necessarily worrying about each component. And if you get on board when the stocks are down, there is only one way. UP, UP, UP!