Your Fearless Guide for Investing during COVID-19 (or any other economic crisis)
2020 has been a year for the record books. The events of this year can’t be compared to other years in our country’s history so I will not even try. However, 2020 has joined the ranks of years that serve to prove steady, unemotional financial strategy will leave you in a better place over time. I have never read a quote or a book from a great financial mind that says “close your eyes, shut off your mind and let your emotions run free, they will always take you where you want to go” or “if strategies have worked over and over again they are bound to stop working someday, so you might as well give up now”.
I think you get my point.
I will never try to predict particular domestic or global events that will impact the stock market, but I will share 4 strategies that you need to know to navigate them when they come.
1. Don’t be surprised when something goes wrong
As a business owner and investor, I have learned that something will go wrong every day. Most of the time it is a small thing but occasionally it is something big. I do not have direct control of most of these events, but what is within my control is how I prepare for them and how I respond to them. Have a plan in place that will go active when the market crashes again. While the experience will not be pleasant, the fact you have a plan in place will allow you to navigate the turbulence with less emotion.
2. Always be buying
Develop an automated investment strategy that will allow you to constantly buy into the market. If you are funding a 401k or other retirement plan from your paycheck, you are already doing this. You can also set up an automatic transfer from your bank to an investment account each month. I am not telling you to avoid having cash on hand to buy large market dips but have a portion of your investing strategy automated and unemotional.
3. Make sure you have accountability
Whether you have a close friend or a financial advisor that you consult with, you need to have accountability. A financial partner will help provide perspective when times get tough and market fears spike. When left to ourselves, most people tend to seek out information that confirms what we already believe and we have tunnel vision on what way of thinking. Give someone in your life permission to ask challenging questions. You may end up making the same decision but at least you were open to feedback.
4. See the opportunities
Regardless of the circumstances, the stock market has always recovered to previous highs and moved higher. Do not forget that. Disciplined investors make most of their money when the market drops, and they can buy at a discount. Buying when the market is at an all-time high may feel better, but you are paying a premium. Warren Buffett famously said “Be Fearful when others are greedy, and greedy when others are fearful.
No one knows exactly when the stock market will correct but we know it will. And if you don’t have a plan yet for where to invest in 2021, here’s a resource to help get you thinking. The market has always moved in cycles and trended up over time. Through wars, pandemics, and financial meltdowns the market has found a way to recover and grow. That is because new companies will form to solve new problems and old companies will find a way to adapt or they will close their doors. When past markets have appeared to hit a ceiling something unexpected enters the game and takes it to the next level. The internet, faster travel, and emerging global economies are a few examples of variables that helped the stock market reach new heights. Do you think innovation and invention are going to stop suddenly?
Develop a plan that gives you guidance during good times and bad. Your future self will thank you.
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