This pandemic has plunged the global economy into a severe contraction and we may ask, is investment still possible amidst this pandemic? What type of investment should I engage in?
When it comes to investing during a financial crisis, take note of the following:
- Stay calm although you are still feeling emotional about the current situation. Staying rational about your investments is one way of keeping your finances on track.
- Do not forget the importance of diversification. Spread your money out over different funds and company shares, across a variety of assets, industries, or countries.
- Consider drip-feeding and invest your capital into a specific goal. Slowly advancing funds in stages is good in funding a startup or build up a retail investor's investment pool. Buying at a cheaper level if the markets go down, could somehow smoothen out returns.
Wise investments during a pandemic
- Condominium units are an attractive investment option as this pandemic highlighted the need for the workforce to be in an integrated community where there’s immediate access to essential goods and services, as well as to health services and facilities.As people desire convenience especially during this uncertain time, condo units remain one of the best investments.
- Cryptocurrencies. The legitimacy of cryptocurrencies and blockchain-based digital assets such as bitcoin and Ethereum against inflation has been questioned for so many years. The fact remains that bitcoin has performed comparatively well amidst the pandemic. The price of bitcoin (BTC) fell below $4,000 in March, but it rebounded back to over $9,000 per BTC in May. This shows that bitcoin is a highly volatile asset. However, BTC has outperformed the stock market since the outbreak of Covid-19 with the falling only at 5% compared to the MSCI All-Country World Index, which posted a 16% drop.
- Precious metals. In times of instability and uncertainty; gold, silver, and other precious metals bullion are among the best safe-haven assets to invest in; as their prices either stay the same or become higher when the stock market nosedives. Since the beginning of the global pandemic, the year-to-date value of gold has increased by over 13%, as of July 2020.
- Tech Stocks. Most people from around the globe are either working from home or studying from home since the outbreak of Covid-19, which drive equities in the consumer tech and high-tech sectors to perform well. With investors looking for companies positioned to perform well in both “normal” and work-from-home economies, most technology stocks have all seen consistently upward price movement.
- Cash. Cash on hand helps prevents the risks in the securities market. This investment strategy may be too risk-averse and there may be negative tax consequences of holding on to cash long term, but you may want to reserve a portion of your portfolio for cash on hand for emergency purposes.
Remember that in investing, no allocation strategy is free from risk, just steps to minimize your exposure to risks such as systemic risk, inflation risk, and market risk.
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