How The Pandemic Will Affect How You Invest Your Money
It’s fair to say that 2020 has presented people around the world with an unprecedented financial situation. While we’re seeing some signs of a gradual return to normal in parts of the world as we move out of summer, the fact remains that the global economy is in a state of flux. Recovering industries still don’t know what to expect moving forward, and markets of all kinds remain unpredictable. And at this point it’s clear that all of this uncertainty should be impacting how people choose to invest their money.
In the past, we looked at ‘5 Ways to Help You Achieve Your Financial Goals’ and spoke about the idea of seeking out financial growth opportunities beyond standard savings accounts, and mentioned the importance of knowing your options and doing your research. These things are more important than ever in 2020; knowing options beyond the basic can expose you to more opportunity, and doing your research can help you determine if a given venture is worthwhile in such an unusual economic climate. To help get you started though, we’re going to identify a few popular investment options, as well as whether or not they make sense in the ongoing pandemic situation.
Investments to Avoid
Stock Market – There’s a certain logic some have been tempted to follow that with markets crashing, it’s a good time to buy in and catch the upswing. However, some experts have cautioned that this is a reckless approach, and have instead advised doing nothing in the stock markets right now. Business Insider quoted former Wall Street executive Sallie Krawcheck conveying this message in no uncertain terms, saying “any investing advice that involves taking action is bad advice.” Krawcheck’s thinking (which is shared by many reasonable market investors) is that reacting in any way to a market in flux is poor strategy.
Oil – Oil is somewhat similar to the markets in general, in that some see an opportunity in it because it crashed so dramatically. Oil has already bounced back to some degree, which may even validate, to some, the argument that buying in at the low point was wise. However, it’s important to remember now that oil faces long-term difficulties. Production efforts have been cut in an attempt to preserve the commodity’s value in the face of plummeting worldwide demand, which has led some to believe that oil may not regain its former strength in full for years, if ever.
Cryptocurrency – Cryptocurrency has actually been somewhat interesting throughout the pandemic. Initially, it looked to have disappointed many investors who have long hoped that it might be a safe haven in an economic collapse. Following the worst of the market crashes though, cryptocurrency prices did actually recover, and even surge, at least mildly. Now, however, investment is a risky prospect. Cryptos are difficult to predict at the best of times, and how they’ll react if other assets and markets begin to slowly regain strength is too difficult to say.
Investments to Consider
Forex – Forex is another name for the foreign currency exchange, which actually constitutes the largest trading market in the world. It can make for challenging investments, and now is actually a particularly tricky time given that with world economies in flux, world currencies may also be somewhat more unpredictable. However, one aspect of forex trading makes it more appealing than some other major markets. In a guide to forex by FXCM, it states that the big difference between forex and stocks is that with currency, you can trade up or down just as easily. That means that rather than just trying to catch an upswing (as with stocks or cryptocurrency), you can make trades to profit on currencies rising or falling in value. Thus, if it becomes clear that one economy is bouncing back while another is struggling, there could be opportunities in both directions regarding the respective currencies.
Real Estate – Real estate makes for a different kind of investment altogether, and for some it may not always be feasible simply because of the capital involved. Property purchases have had a real boost with the stamp duty freeze, and we are seeing a revived market. We also know that in many cases, real estate activity is one of the key signals of economic recovery. Buying up affordable real estate now may be a worthwhile investment in that you might be able to profit off of it in the near future.
Peer-to-Peer Lending – Peer-to-Peer Lending is an investment to consider right now*, simply because it isn’t necessarily influenced by market upheaval. For those who aren’t familiar with the idea, it boils down to loaning money to borrowers with the promise of eventual repayment with interest. And thanks to online platforms like ours that can help to facilitate these arrangements, this practice is arguably easier and more accessible than ever before. Plus, as you might expect, there is a lot of opportunity in this specific space at the moment! Many have been affected financially by the pandemic, and may be looking for ways to borrow cash at a time when the banks, too, are struggling. This could well lead more to explore P2P lending options, and it gives you the opportunity to help someone in the short term even as you set up an investment.
Stay-at-Home Stocks – We did suggest that stock market investment might not be the best idea right now. But as EuroNews put it, “stay-at-home stocks” essentially represent a new category that can make for strategic investments. The idea is that these are stocks related to people’s new lifestyles, involving remote work, remote socialisation, and even remote education. Companies from Zoom to Amazon are specifically helping people to stay at home more easily, and are thus in high demand (and likely to remain so for the foreseeable future). It’s always tricky to invest in assets that are already performing quite well, but in this case the stay-at-home category may well have long-lasting value.
Every investing decision is a personal one, and these tips shouldn’t change that. We can’t tell you definitively what the best way to invest (or not invest) might be. With particular regard to the current economic climate though, these are some sensible perspectives worth taking into account as you plot out your next financial move.
*This is not to be taken as financial advice, and you should seek independent financial advice from a qualified professional. Capital is at risk and Kuflink is not protected by the FSCS. Securing investments against UK property does not guarantee that your investments will be repaid and returns may be delayed.
Contributed by Tina Bradshaw
Exclusively for kuflink.com