Many investors are noticing that their favorite stocks are trading at a steep discount during the coronavirus crisis, and may be wanting to take advantage before the coronavirus market downturn ends. But is it the right choice, and are there important considerations to be mindful of?
Ultimately, it depends on your financial situation and investment goals. But remember, investing consistently — even if it’s a small amount — through the highs and lows can really pay off down the line. More on that here.
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Tips for Investing During COVID-19
Here are some practical tips on investing during the coronavirus.
Allow compounding interest to work in your favor.
If you’re young or have several years before you’ll want to withdraw your investments, it may be an excellent time to start or even increase your investing. Many companies that may be struggling right now should rebound over time, which means you could earn returns if you buy when their stock is at a low point. Learn more on why it pays to stay invested even when the markets get rocky.
Also keep in mind that the earlier you begin investing, the more time you give your money to work hard for you. Compounding interest can be more powerful for young investors who invest for longer, as you can allow your money to sit for years, earning interest on top of interest!
Don’t try to time the markets.
Investors who exit the market hastily when the going gets rough are often far more likely to lose money than those who stay calm and stay the course. In other words, cashing out all your stocks when prices drop may not be the way to go and could really cost you in the long term.
A better idea: It is likely in your best interest to leave things as is. If you have many investing years ahead of you, there should be plenty of time for the market to rebound, and your investments should start to show gains over time.
Also, remember that the only sure way to lose in the stock game is if you take a distribution (withdrawal) when the value of your investments is down.
Of course, if you have to choose between future earning potential and feeding your family now, you definitely want to do the latter, assuming you’ve exhausted all other options. If you have questions or are nearing retirement or needing cash when volatility strikes, consult with your financial adviser to make adjustments to your portfolio. If you’re a MoneyLion member, you and just adjust your portfolio to be more conservative using the Risk Slider in the app.
When It Might Not Make Sense to Invest
Strapped for cash right now due to COVID-19? You may want to put investing on pause or reduce the amount you set aside to invest until you have even a little more disposable cash. If you Auto Invest with us, it’s easy to lower your amount or pause investing. We’ll even lower it for you if we detect that your Auto Invest could draw your bank balance too low.
And remember, the investing game is a marathon, not a sprint. This means you must be willing to leave your money invested for a bit to allow compounding interest to work in your favor and maximize your earnings. So if you think you’ll need the cash within a month or two after you purchase shares, it may not be worth investing yet – as you could break even or even lose money.
If you fit into this category, create a spending plan to get your expenses in check and free up any disposable income. Here are 10 ways to reduce expenses.
The proceeds from your economic impact payment and any extra unemployment benefits if you were furloughed or laid off will hopefully help with today’s expenses. Check out our 0% APR Instacash advances if you need a little cash boost. And if you have even a little extra, a small investment can go a long way, and you can start investing with $1 with MoneyLion.
Start Investing Today
Want an investment platform that does the work for you? Consider opening a Managed Investment Account from MoneyLion. There’s no minimum investment requirement, and you will enjoy fully managed investing so there’s no experience needed. Here’s how it works:
- Download the MoneyLion app and open an investment account.
- Select your investing goals.
- Review the personalized portfolio MoneyLion creates based on your investing goals.
- Start investing with as little as $1.
- Make adjustments if you choose or let MoneyLion monitor and rebalance your portfolio over time
Learn more about how investing with us works here.
Auto Investing is also available to make it easier than ever to start building wealth. With this feature, you can select the amount you want to contribute to your investment account on a weekly, biweekly or monthly basis. It must be at least $5 to use this feature, and the funds will automatically be withdrawn from your account.
Plus, the feature is also smart and will automatically lower or skip your contribution if it threatens to overdraw your bank account.
A Final Thought
Economic recessions don’t last forever. Many investors who capitalized on market downturns in the past reaped returns when making strategic investment decisions. So, capitalize on the opportunity to work toward building wealth if your budget permits. The Managed Investment Account from MoneyLion is a great place to start.
Investing while stock prices are low could turn out to be a wise maneuver when the market rebounds. That doesn’t mean that you’re not at risk as there’s no way to predict the future performance of a particular stock.