“The greater the obstacle, the more glory in overcoming it.”― Molière
It’s been awhile since I’ve posted and I think, as we all know by now, much has happened. The spread of Covid-19 has begun. It’s journey across the United States is flooding our economy with uncertainty. In about a two week time frame, three years worth of gains on the Dow Jones Industrial have been erased. And now many are believing that almost an eleven year Bull Market, most of us have been enjoying, is coming to an end. However, today’s blog isn’t about focusing on the fear or uncertainty the nation is currently facing. Its about recognizing the opportunity before us and how to navigate our investments as the market changes. Today’s blog will be a little longer than usual, however I think there might be some value and will spark some ideas/creativity to all investors who read. Here are my predictions for the market in the face and aftermath of Covid-19.
The Markets – Over the past weeks, market conditions have greatly fluctuated and now we have a very volatile market. One day we could show gains of a thousand points or more on the Dow Jones industrial ,however the following day it will be down by two thousand points. As an investor what do you do with these types of market conditions? Do you sell and salvage whatever gains you had left? Or do you buy more into the market and purchase stocks at a discount? Or do you simply do nothing? The answer really depends on your financial position and goals. At this time, I would not take your money out of the market unless you are in dire straits for liquid cash, a reason for this might be an expected job loss.
If you are planning on investing or continue investing in the stock market now is a wonderful time to do so. However when doing so, note that the stock market is a long term game. That’s why it’s important to budget and only put in enough capital that you are comfortable with. By no means should you put in your life’s savings or every dime you have. Realistically, in these market conditions, the market will continue to be volatile for many more months. Most investors will need to come to the reality of losing money before seeing gains is very probable.
The next question many people have is what to invest in? If you read any personal finance books, most of all the advice is to invest in the same thing; low cost total stock market index funds. Total stock market index funds are a great way to navigate around choppy market conditions. In short, these types of index funds track the market. So as the market goes up your earnings go up and vice versa. In my personal investing career, I like to track the DOW JONES instead of individually tracking stock prices. What I mean by that is that I know I invested when the DOW was at 21k Points and plan to enter another installment when the DOW is around 16k points. In the next 5-10 years, hopefully after Covid-19 is contained, if the market rises to where it was prior to Covid-19, around 29k points, I should see some decent gains. Again it all comes down to patience and perseverance. For some personal reference check out these index funds for Vanguard, Charles Schwab, and Fidelity if you are interested in investing here are the stock tickers – (VTSAX, SWTSX, FSKAX)
Real Estate – So say you don’t want to invest in the stock market during this time. Or more importantly you don’t want to wait 5-10 years to see your money start earning. Real Estate is always an option! The pros with real estate right now amidst Covid-19 is that interest rates are low, like really really low. The Federal Reserve keeps cutting rates and as a result it is still very cheap to borrow money. Yet, with Covid-19 there are some things you need to look out for when investing in real estate:
Tenants – We have always known it’s important to screen tenants however with Covid-19 I’m predicting many tenants (and people in general) are going to be losing their jobs. With entire states shut down and deeming what businesses are essential and non essential, many businesses aren’t going to be able to keep their head above water. So how will you find tenants? Tenants need jobs to pay the rent and if jobs are scarce, how can you combat this? Some ideas might be to look for properties in the area of hospitals or other healthcare facilities. While many businesses are going to shut down, healthcare workers are going to be gainfully employed for a long time, they’ll have steady work, long hours, and might be looking to move closer to their place of work.
Commercial Real Estate – If you were thinking about investing in commercial real estate, such as strip malls, office condo’s etc… I would hold off. The reason being is that Covid-19 has essentially forced many businesses to adapt or go out of business. With many workers working from home, I feel many business owners will realize that they don’t need the amount of square footage they currently have. Or can have a hybrid office where some people work from home some days. This matters because it’s very possible some businesses will come out of this Covid-19 experience thinking they might be able to have their staff work fully remotely which would eliminate many businesses largest overhead expense, their lease or real estate. My prediction is that we will see more businesses offering employees to work remotely and it’s possible not so much demand for office space will exist.
Conclusion – During these unprecedented times, it’s important to take them for what they are. No one, in our lifetime, has lived through a time like this. When it comes to many things with Covid-19 there are things we don’t have control over. However, our finances we do have control over. We CAN choose to invest, prepare, save, look for another job if we feel we might get laid off, or we can take this time to roll with the punches and dig into our creativity to emerge stronger as a nation and more united. We have the option to develop a more caring understanding for our service workers, healthcare professionals, transportation workers etc… It’s times like these that make us appreciate what we have and take the measures we need to fight, to maintain and come out stronger on the other side. Please share your thoughts in the comments. We’re always excited to hear from you with any questions or thoughts!