How To Invest During The Pandemic
- The Millennial Millionaire
- Nov 12, 2020
- 3 min read
There’s no two ways about it – the pandemic sucks. No one likes a lockdown and the restrictions on our freedom – be that the inability to see friends or even family. However, while some aspects of our lives are suffering – our finances don’t have to.
Those of you whom are fortunate enough to still be employed or to have disposable income at the moment may find yourselves accumulating lots of cash. Previous, more expensive lifestyles are no longer on the table – as so many businesses are forced to close. So, you may find yourself wondering how should I invest this money to get more – making that money work for you.
Hesitation
The issue many people have is regarding when to put money into the stock market. You may think that you should invest – but what if prices are cheaper tomorrow? Or, what if they’ll be cheaper next week? We ignore the overarching trend in that over time, markets go up, and our investment now – especially if you are young, is a long-term one. Long-term, the likelihood is that you will make money – and time in the market is far more lucrative than timing the market.
Picking investments
Whether it’s a news article you’ve read or a friend’s opinion – many people try to cherry pick stocks to invest in. I’m here to tell you that it’s a waste of time and money. Yes – you could have invested your money in Tesla and had 10 times as much now – but you didn’t. And the likelihood is that it won’t do the same again. Your best bet is to invest your money in broad index funds. If you’re UK based then a FTSE index, if you want some US exposure then perhaps the S&P 500 index. There are plenty of index funds out there and the important thing is to look out for the low fee examples - Vanguard and Fidelity have some of the best ones.
Not only will you save money by taking this advice – it will stop you looking at the markets everyday wondering if that stock you picked is going to go bust or not. If there’s anything the pandemic has taught us – it’s that no single business is risk-free.
Property
You may also look to property as another asset class to invest in – if you’re fortunate enough to have the money for a deposit. With stamp duty scrapped and other incentives from the Government, it sounds like the perfect time to buy.
You may find friends and family say to wait for the end of the furlough scheme, or wait until stamp duty is re-introduced – as prices are too high. Realistically, over the long-term (like the length of the mortgage) prices will increase – so if you can afford to buy a home that you’re after – why risk it becoming unaffordable? We really just don’t know what could happen to the housing market, just like the stock market – so it’s another case of time in the market winning over timing the market.
Time in the market vs timing the market
This is a common phrase from investors – the gist of which is that you should always put your money in the markets when you can – as opposed to constantly trying to buy at the lowest point during a crash. No one can accurately predict the bottom of a market consistently – therefore the principle of timing the market is simply a gamble.
Stocks and property are both real assets. This means that they increase with inflation and then some. Therefore – to protect your money you’ll want to invest in these assets while you are young – so that the value of your money is protected and then some – as I explain with chocolate bars here.
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