It is a good time to invest during the Covid 19 Pandemic?
The stock market crash of 2020
On how to invest during the Covid 19 pandemic
After a tough ending to 2018, stock markets rallied back and ahead roughly 30% over 2019. Though this marked a bull market – everything consistently growing and gaining – for +10 years since the last market downturn back in the financial crisis of 2008. In which historically speaking means we were way overdue for a reset, no one could have predicted the Covid 19 pandemic.
Over February and March 2020, markets crashed nearly 20% as well. Since then, historic responses have been made to curb the Coronavirus outbreak, by basically closing down the economy and then injecting money and stimulus to keep Major companies, industries and average citizens afloat.
Now in early May, markets have gained back a lot of what they originally lost. Though we are still a ways off from the highs of January 2020. You may have missed the opportunity to buy low back in February and March. But I still believe you are in a great position to now invest during the Covid 19 pandemic and moving forward.
When is the right time to invest?
The million dollar question that is relevant not just now, but at any time. When is a good time to invest in the stock market? In any case the answer is usually now or whenever you have money available that you won’t need in the next 5-10 years or more. My personal plan isn’t to touch my investments for +30 years or potentially ever. But that will vary with your goals and aspirations.
Thats a high level answer, but it also applies during the Covid 10 pandemic. Shortly I will outline my assumptions and arguments for investing heavily over the next 12 months. And when I think will be the best time to look forward to invest in the stock market. First though, let’s get a little understanding of the big picture.
What is a market cycle?
Here is a quote from Financial Dictionary dot com on the market cycle.
“A market cycle is the movement from a period of increasing prices and strong performance, or bull market, through a period of weak performance and falling prices, or bear market, and back again to new strength. Cycles recur periodically, though not on a predictable schedule.“
And here is a fancy little diagram of how the cycle flows. Also showing general public sentiment during the cycle.
Why you should invest during the Covid 19 Pandemic
First off, it high time that I re-iterate as I have many times on this blog: I am not a certified financial profession in anyway. And nothing I say should be considered financial advice. Do your own research and speak with a financial expert before making any moves. I’m merely a guy interested in personal finance and reaching my own financial freedom.
Alright, onwards. I believe you should invest during the Covid 19 pandemic right now, because I stand by my original statement that disciplined, consistent investing whenever you have the available funds is the best way to grow long term wealth. Timing the market has shown time and again it does not work, sure you can get lucky a few times, but for the average person its going to be devastating.
You should also invest now because we are still a decent ways off from 2019 levels. Remember the cause of this crash was not like the financial crisis in 2008. Governments turned off the economy. Businesses were still functioning fine before the virus. Granted we will not just snap our fingers and things will return to normal as they were. The growth will take time, and many businesses will likely not reopen. This is another reason why now and the next 12 months is a great time to focus on building your investment portfolio.
I personally believe autumn 2020 will be the best time to invest, as I foresee another downturn. Multiple reasons for this as follows:
- Fall seasons usually show a spike in virus and flu activity. Experts are predicting potential second waves come fall time unless a vaccine is rolled out or we some how have managed to really stop the spread over the next few months.
- Canadian CERB and mortgage deferrals end in the fall. Unless we show serious progression in curbing the virus further or a vaccine comes out, life as we know it will not have returned to normal and people will still be out jobs, lack customers and unless another the programs are extended, will again lack income.
- The US election is in autumn 2020. While Trump was really expected to win, his response to the Covid 19 pandemic may have changed minds. Should he win, as markets expect and which benefit from, there would likely again be a huge surge as there was in 2016. If he loses to a more far left-leaning democrat, markets could recede significantly.
Is investing in the stock market safe?
Again, not a financial expert here, chief. investing in the stock market always comes with risks. These risks can be mitigated by investing properly. Like, don’t try time the market and day trade, cowboy. There are huge billion dollar companies with floors and floors full of highly paid analysts with loads of technology that still can’t do this consistently. This is gambling for the average person. Don’t forget, everyone thinks they are above average.
For most people. Buying into total market ETF’s is the best play. It’s passive, its consistent over the long term and you won’t lose the farm. If you do, hope your elected leaders don’t take away all our guns before the market ever goes to zero.
The 15 year average return on the S&P 500 is about 11% with dividends. Aim for the bench mark. Experts say closer to 7% is a safer average return to make your future plans on. Even at that, $500 a month invested for 35 years makes you nearly a MILLIONAIRE. 11% would be shy of 2.5 million, in the same scenario.
How do I invest during the Covid 19 Pandemic in the stock market?
Glad you asked. I’ve loaded all my knowledge of the topic of investing that contains years of direct investing experience and research. You can find and download the FREE ebook below.
The Simple and Straightforward Investing Book – for people who don’t care about investing
This Ebook includes the philosophy and advantages behind passive investing for the future. What kind of funds to look into and which online brokerages to sign up for and use. Its a one stop shop book that I wrote with my family and friends in mind.
I also implore you to up your financial literacy by looking around the internet at the FIRE (financial independence, retire early) movement as well. Personal finance, financial freedom, passive investing, ETF investing, these are all keywords that can help you gain knowledge on investing in the stock market.