Is it a smart idea to invest in stocks during the pandemic?

Dan Martin

Editor

 


When talking about the stock market, the question that always comes to many people is this – when is the right time to invest? Many would argue that there is no better time to invest than now. But what if that “now” is during this coronavirus pandemic?

The coronavirus pandemic has definitely changed the way we spend our money. From buying essential goods to the non-essentials, we now think twice before making that purchase.

invest in stocks

Is it a smart idea to invest in stocks during the pandemic? Source: pixabay.com

With the coronavirus wreaking havoc and stay-at-home orders are still pretty much on hard implementation, you may find that you are spending quite less than usual on non-essential things.

No money spent on transportation, dine outs, recreational, entertainment, and more, means there is some extra money aside – even if it’s just a little bit.

Knowing that you have a little money set aside now, what should you do with it? When your little gut says to invest it in the stock market, is it really wise?

Consider asking yourself first with these questions before making those major money decisions.

SEE ALSO: How to invest in stocks with limited budget

1. Is your emergency funded fully?

Given the situation now, begin with your emergency fund first. It should be stocked with at least three to six months’ worth of your salary. It should cover three to eight months’ worth of living expenses like rent or mortgage, basic needs, utilities, expenses, etc.

Considering how volatile the current economic situation is now, think of objectively about the security of your job. With that, consider how many months you want to save up for. Setting aside extra months’ worth of cash may not be a bad idea.

2. Do you need the money now?

invest in stocks

Do you need the money now? Source: unsplash.com

Let’s say you have set up a healthy emergency fund, still, you are left with a few extra bucks. Think about your goals and time frame!

Analyze your goals if it’s short to average term – like three to five years from now – you might want to save your money rather than investing. But don’t just save it in your pocket where you’ll earn nothing more than a roll of lint.

There are places where you can save up (in a short period with a maximum of 5 years) and guaranteed you’ll earn interest from it.

Save up your money in a high-yield savings account – guaranteed you’re getting the maximum interest possible. Different credit card companies offer this, as well as online-only banks. Typically, you will earn around 1%-2% annual interest. Mind you, that is more than what traditional savings account typically accrue.

Also, you can try putting your money in a certificate of deposit account. This is a type of time deposit commonly sold by banks, credit unions, and thrift institutions. They differ from a savings account in a sense that DC has a specific and fixed-term – often one to six months, or one to five years – and usually a fixed rate.

CDs are expected to be held until maturity. And also, they offer better interest rates depending on the amount deposited and the duration. However, whenever you have early withdrawals, you will be charged with a penalty.

Now, if you are looking for long-term plans and goals, then by all means invest in the stock market.

SEE ALSO: The best ways to invest $10,000

3. How much risk can you take?

invest in stocks

How much risk can you take? Source: pixabay.com

Are you willing to take a risk? Take note that in the stock market, losing money is very prevalent – try calculating your risk tolerance. This is how well you can adapt to the idea of losing your hard-earned money.

If you are a beginner, look into mutual funds, exchange-traded funds, and index funds first. These are less risky than individual stocks. To help you get started, there are tons of books, online articles, and even free podcasts.

Furthermore, you can also hire a financial adviser to help you with your dilemma. They are more equipped with knowledge about how can you make a profit of your own money.

4. How much cash do you have?

There’s really no exact rule as to how much to save, right? It could be as little as $5 per week, or you can go as high as $100 per week if your means allow you.

Now, it’s the same with investing – you can go with as little as a few dollars per month. Here is where the robo-advisers like Acorn, Ellevest, or Wealthfront come into the picture. They have easy methods to set up investing in little amounts, even with just your spare changes.

As mentioned by Joyofandroid, there are many apps that will help you cope up with the coronavirus pandemic. And these financial institutions’ apps are the same as they do the investing for you, but often with a minimal fee.

Bottomline

Money is hard to come by for many people in these trying times. There are actually a lot of people who lost their livelihood due to the pandemic. And even parents finding themselves into debts because of it.

No matter how little we have, in these times, saving is better than nothing at all. If you have a little to spare, invest it, and let it continue to grow!


Dan shares his newfound knowledge with other Android enthusiasts on joyofandroid.com. Dan also enjoys photography and cooking steak.


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