How to Look for Investing Opportunities during the COVID-19 Crisis
With a new bear market settling in, new opportunities for a prosperous investment can feel few and far between. However, this current bear market caused by the COVID-19 crisis feels like a new beast entirely. In many ways, the US’ economy has been turned upside-down by this infectious disease in what we're calling "The Great Repression." This was a mandated shutdown, an event-driven bear, rather than an economically-driven bear market. So, where are you supposed to turn to make an even moderately successful investment?
The truth is, there is no one secret to finding investment success at a time like this. In the same vein, no one stock or bond option will keep your portfolio afloat on these turbulent seas. However, there are some actions you can take to ensure your head stays above water during the COVID-19 crisis. Here are just a few tips you can take to heart, regardless of where you stand financially in this new bear market:
Look for Timely (But Sustainable) Growth. If you already have some experience in stock investing under your belt, you may feel like you know how to proceed during a bear market. In fact, you may have already nabbed a few shares of a news-worthy company like Zoom after their userbase soared into the millions. But if that’s the path you’ve taken, you may have forgotten the importance of long-term investments in any stock portfolio.
There’s no question that a stock like Zoom could bring you some short-term gains. But in the long-term, it’s unclear if they’ll remain a market leader. They already have a ton of competition, so they may be positioned to lose out once the current crisis subsides. Instead, you should be doing your research and investing in industries that are positioned to grow further post-crisis. Amazon is an obvious choice, while some smaller companies in the cloud service industry may also be worth checking at this time.
Don't go to Cash
What not to do: go to cash. Unless you have an incredibly short time-horizon (ie: less than 3 years - and no, don't suddenly say "this is a shift in my time horizon" - you'd only be lying to yourself), cash is like a thief in the night. It feels safe, but over time inflation will eat away at your purchasing power.
Watch for Fraudsters
Every investor dreams of getting in on the ground floor of a revolutionary company. Even now, during a crisis, many investors are on the lookout for a company who has some insight into ending the threat of COVID-19. As a result, numerous rumors have begun to spin up about which company has a cure or a vaccine in the works right now. But in all cases, those rumors were artificially created by fraudsters who simply want to take your money.
The SEC has acknowledged as much by recently warning investors to be extremely wary of any claims that a company has insider knowledge about a COVID-19 cure or vaccine. The SEC has noted that these claims are usually made by operators of a “pump-and-dump” scheme that is designed to burden you with immense losses. As such, you need to keep your guard up at this time and pass on any investment opportunity that sounds too good to be true.
Don’t Let Politics Get into It
This may sound like a usual tip, but try to keep your political beliefs out of your investment portfolio at this time. Regardless of your specific beliefs, politics has a way of clouding even a wise investor’s judgement during a crisis. Mixed messages in particular can cause an investor to place too much faith in an investment before the economy has recovered enough to support it.
In other words, don’t let rhetoric guide your hand when picking when to invest. Stick to reliable financial news resources right now and rely on them to tell you when the economy has begun to recover.
The Bottom Line
Finding fresh opportunities for investment during the COVID-19 crisis has been a challenge up to this point. But there’s hope for the future still, even if we have to ride out this bear market for the remainder of the year. These tips will help you do that without adding too much risk to your portfolio at any given time. Though I can’t promise success with these tips, I can assure you that they’ll help you remain focused on keeping your long-term investment goals intact.
*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 Focus Asset Management with Advisor Websites to provide information on a topic that may be of interest. Copyright 2023 Focus Asset Management & Advisor Websites.