The spread of Coronavirus severely affected the global economy which impacted many investors and created unique investing opportunities. The pandemic began in December 2019 and still spreading around the world without any sign of slowing down. These are hard times and even the most powerful countries are facing an economic crisis due to the pandemic. No company or industry is immune from the challenges caused by the mess and there are clear concerns about the damage that has been done by the pandemic. The stock market is also facing ups and downs as investors are experiencing roller-coaster swings in the market as well. Everybody is heavily concerned about this as this is not a common experience.

The Pandemic situation has affected and altered everybody lives some adapted and thrived others faced hardship. Our daily lives, health, and financial situations were heavily impacted by the Coronavirus as millions of people lost their jobs. The world has not faced such an economic crisis for a long time and certainly not going to witness something like this for a while. 

But still, every coin has two sides. Perhaps Covid has taken a lot from us but we can still learn many things from it and prepare ourselves for the next big thing. In this article, we will be discussing investing lessons that we have learned in 2020 so far and grow from our experience.

Diversification is the key:

The best way to reduce risk and maintaining a good investment portfolio is by diversifying your investments. Diversifying your investments can be beneficial and less risky if it is done correctly. Some equity and debt investments offer attractive returns and opportunities when you look for medium and long-term investments. In this current situation, investors should maintain a good investment portfolio by diversifying their investments to get profits in the future. 

When you diversify your investments across a variety of investment products, it automatically reduces the risk of losing money. It makes sense. For example, imagine you have invested 30% in stocks, 20% in bonds, 30% in fixed deposits, and 20% in real-estate. In case the stock price falls, your loss will be limited because 70% of your investments are spread out in different sectors to hedge against the UNKNOWN.

Emergency funds:

Pandemics or economic crises can come without any warnings as they are full of uncertainty and their impact can be devastating. Millions of people lost their jobs and thousands of companies were shut down along with millions more also facing severe health issues.

In these rough situations, emergency funds are needed to help bring relief to our daily lives. Covid was a real eye opener of how the Average American are still living pay check to paycheck, Disasters can happen at any moment of our lives such as accidents, loss of jobs, health issues, debts, and many more unimaginable events. 

Before investing ensure funds are saved enough in event of any emergencies Your funds need be easily accessible in other words liquid disposable cash you can retrieve at any moment because in emergencies, you will have little to no time for gathering funds.

Now the question is, how much money should you save as emergency funds? Well, it depends on your profession and your income. Roughly, you should save at least the amount that can cover up to 4-6 months of your necessary expenses including debts, food, medicine, and other necessary things.

Invest in Bonds:

During the pandemic, interest rates were at its lowest as the Fed Gov kept interest low in hopes of a stable economy. High-quality bonds can play an important role in investors’ portfolios as this strategy was adopted by thousands of investors after the market crash. Owing high-quality bonds that bring investors a fixed income can help them to maintain their financial status as well as their emotions.

As an investor keeping your emotions and mental health in check is really important as it allows the investor stability even in this economic situation. Since bond prices fluctuate way less than equities, investors can make a good income by selling those high-quality bonds. 

All these factors help investors to keep their investment portfolios on track and help them to meet their financial goals even in this financial crisis. 

Doing nothing can be a great strategy:

This will be a very bad idea if you are thinking of choosing between buying and selling your stocks. Many investors are thinking of recovering their losses by selling and buying stocks. Problems arise when you try to recover your losses by doubling the bets in this situation. Currently, the market is volatile, and investing in a volatile market is not a good idea. Instead of recovering your previous losses you could be digging yourself in a bigger hole. 

You cannot afford to make mistakes in this situation. Don’t get emotional and don’t think of investing as of now and instead of investing save as much money as you can. Once the pandemic has peaked and the market shows signs of recovery and you are confident, you can start investing again. Sometimes is better to do nothing than to run high on hope and make mistakes. 

The markets are unpredictable:

Every time the market turns towards a new direction, the market is volatile. Volatility means a sudden rise and fall in the market which affects the share price and market demand which proves the stock market is unstable. Certain events can affect stock demands and prices. We are witnessing an event as of now. 

The market is volatile because of these reasons and no one can exactly predict anything regarding the stock market. The bottom line is any event can drop or increase the market values. 

Difficult times have their own opportunities:

Investment legend Warren Buffet once maintained, in order to become a successful investor, you should look at stocks exactly you would look at your favorite product in a bargain sale. The year 2020 has shown us that buying quality stocks when everyone else is scared can be profitable. Look at it this way, no one is buying stocks because of the risks, so you can buy good-quality stocks at a low price. When you invest in good-quality stocks their price will be increased eventually. 

As Warren Buffet says “Be fearful when everyone else is greedy and be greedy when everyone else is fearful”. 

There is no perfect time to invest:

It is really hard to predict the market as it can fluctuate at any moment. Time in the market is always greater than timing the market. Instead of looking for the perfect timing, which is beyond the average person’s scope to handle you should focus more on the establishment of your funds and a disciplined investment plan. With a disciplined investment plan, you can achieve your goals faster. 

A common yet effective quote for investing is: “It is time in the market, not timing the market”.

Controlling your emotions is a key factor:

At the beginning of the year 2020, the market was performing really well and the stock prices were high so investors were buying at the all-time highs.

Investing without any financial and investment plan is very risky and it is recommended you research before you begin. It is the beginning of a new way to deal with things. Start using your brain instead of your gut feeling in these situations. The world’s leading companies are not going to vanish overnight and this is not the end of the economy as well. Panicking emotions is not a good combination when it comes to investing.

Always stay positive:

No matter what the situation always remember it doesn’t hurt to be nice and optimistic. It was a tough year on everybody and has taken a toll on many of us, but has also given us a lot of things as well. In the period of lockdown, we got the chance to work remotely and that changed the outlook on every worker in the world.

We were able to spend a lot of time with our loved ones as we don’t get enough time to spend quality time with our family members. This pandemic has brought us together and helped us to develop a strong bond with our loved ones. Economic crises happened in the past and we have recovered from them. So be patient, it is going to end as well.

In this article, we talked about how the pandemic affected our lives and what we can learn from the year 2020. It was a rough year and we have suffered a lot. Most investors faced huge losses but as soon as the situation gets better stocks go back up. Using our experience and the lessons that we’ve learned from the year 2020, we can stay prepared and hope for a better future.