Is this a good time to invest? Great question!
With everything going on in the market now, this period presents great opportunities for some investors to invest and build their portfolios. But for some investors, it could be a huge mistake to invest at this time.
Think of it this way; most companies are closed and some organizations have either laid off some of their employees or have implemented pay cuts to keep their employees working from home. Although some people still have their jobs and receiving full paychecks, a lot of people are struggling.
Concerns and reactions about the coronavirus pandemic hit the global financial market and caused it to plunge deeply into the bear area. Global stocks witnessed one of the fastest falls in history within this Covid-19 period.
This, however, means that most stocks are ‘on sale’ this time and could present some attractive buying opportunities.
While some investors are seizing this opportunity, others are scared of loosing their nest eggs and are selling off their investments. Some are sitting on the side-lines and wondering what to do and asking if this is a good time to invest.
So, is this a good time to invest?
The answer is either ‘yes’ or ‘no’ depending on your own unique situation. Here is how to know if this is a good time to pump the gas or hit the brakes on investing.
Do you have a steady income?
If you do not have a job or a steady flow of income, the last thing would you want to do now is to expose yourself to the risk of loosing your savings to the current volatile financial market. This would be the time for you to hit the brakes on investing and focus on how to create sustainable income for yourself and your family.
To help you navigate this period, check out these video posts on the 3 steps to building wealth and how to move from income depletion to income replenishment.
However, if your current job is guaranteed and you have a steady flow of income, then depending on your answers to these following questions, this may be the right time for you to invest. This is because, having a steady income is just one piece of the pie and is the first thing to consider before investing. But, having a steady income is not enough to just jump into investing.
Do you have ‘extra’ money to invest?
Given the low prices of most investment assets, It may be tempting to use-up your savings to invest. But what if you have an emergency after you invested? Are you going to sell off your investments just to meet up with your emergency?
But, if you have extra money after you have cushioned yourself with an emergency fund (at least 3 – 6 months of your living expenses), then, this might be a good time to invest the extra money which you don’t have an immediate need of. But, If you are planning to invest your savings without any other cushion for emergencies, I will say do not risk it!
Are you investing for short-term or for long-term?
This is very important in determining if now is a good time for you to invest. Given the cyclical nature of the market, I consider this contractionary period another market cycle after the recent market boom. What this means is that after every market boom follows a market contraction, and then another boom. But who knows when the contractionary period will be over?
It could take the market a long time to recover from the impact of Covid-19, it could also take less time than anticipated. Although prices are low this time, it may take long time before the market recovers and before you would begin to see the return on your investments.
The market will eventually recover, but the question is ‘when’? If your goal is to invest and recoup your investments within a short period of time, now might not be a good time to invest. This is because, the market is still reacting to the continuing development of coronavirus pandemic. What if the market plunges again after you invested? Can you deal with the risk of cashing out on your investments at a loss?
However, when you invest for the long-term, you can buy now at the current lower prices. You will continue to monitor the investments, but leave it there for the long term and allow it to grow with the next market boom. If this is you, then, now is the time to invest assuming you have done your research.
Have you done your research?
It is one thing to have the money to invest, it is another thing to know where to invest. Investing in an asset or a company you don’t know anything about, could be an invitation to financial loss.
One secret to successful investing is to do your research ahead of time, even before you have the money to invest. Click To TweetWhether you have have a steady flow of income, the money to invest, or even ready to invest for the long term, it is very important that you do your research very well before investing. There are lots of assets that are significantly under-priced, not because of the Covid-19 pandemic, but because they were already bad investments, even before the pandemic.
For some assets, their current low prices might be their ‘true’ prices and may have originally been over-priced. Also, there are some assets that are booming in the face of this pandemic. But, will they be able to sustain this growth after the pandemic?
If you haven’t done your research, do not just invest because you have the money and prices are low; research the assets/companies you want to invest in. Know the products, the market, the opportunities and risks. This knowledge will help you invest like a pro!
Need help figuring out this investment thing? Let me work with you! Book an appointment here.
So, is this a good time to invest? I’d like to know your thoughts on this. Feel free to share in the comment section below.
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This is very educating and am happy to benefit from your wealth of experience.am now doing some research on where to invest for a long term.will be glad to keep learning from you.thank you
That’s good to know. Do let me know if you have any questions. I will be glad to discuss with you.
Thanks.
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