Is Now a Good Time to Invest? Determining Investor Goals & Strategies
Determining the question – is now a good time to invest – depends on each investor’s goals, risk tolerance, and investment strategy. In the year 2020, the world has become an extremely complicated place. Many old rules simply don’t apply and many investors are scratching their heads about what the future may hold. In a strange twist of fate, despite all the negatives surrounding industries, now could be an excellent time to invest. Experienced investors, professional stockbrokers, and active day-traders all know that in chaos lies profit opportunities. Smart investors know they have to get beyond traditional models if they’re going to benefit from new opportunities emerging in the marketplace.
No one saw the global effect a modern pandemic would have because it had never happened previously. The stock market is no stranger to fluctuations due to economic circumstances, but no one could predict what would occur in just a few months of living with coronavirus. Despite the Dow Jones, NASDAQ, and S&P 500 downturns early on in the emerging disaster, the recovery from the initial shock has been impressive. Many people that experienced the recession of 2008 were not necessarily in a position to invest then, but they have taken the opportunity this time around. Furthermore, financial literacy and investment knowledge are more widespread than ever amongst the general population. The use of investment apps has become more common as a result, with apps like Robinhood and Acorns reporting over 3 million new users since the beginning of the coronavirus pandemic. And because the coronavirus has more people working remotely than ever, the technology industry has seen a further increase in value. More importantly, this stock market rebound has been largely sustained. Interest rates have stayed low and long-term and short-term goal adjustments have been made in many stock portfolios with diversification being the key.
All investments have risks associated with them; that’s been the case since mankind started investing in stocks and bonds. Today, Exchanged Traded Funds (ETFs), Real Estate Investment Trusts (REITs), and Mutual Funds help spread risk across a range of investment targets. To answer the question on when is a good time to start investing however, individual investors can still learn and discover hidden gems. Growth combined with the correct time horizon should be determined by investors with an eye on both short-term and long-term returns. To this end, an investment advisor could be helpful by providing the kind of information and data needed to find the best opportunities.
Is Now a Good Time to Invest – Types of Investing Strategies and Life Stages
The traditional thought processes for identifying potentially lucrative stocks, bonds, or other investments have all been set aside after the coronavirus pandemic. Economic issues coupled with unprecedented social turmoil may have turned society on its head, but it hasn’t caused the markets to lose their heads. The focus on health, lifestyle, and the future has brought along new perspectives on what were once considered nominally valuable assets. Many markets and industries have been affected by the pandemic and the subsequent realignment of priorities has presented unparalleled investment opportunities. With this in mind, when asking is now a good time to invest, the key here is to diversify your portfolio to take advantage of the broad spectrum of new developments.
This form of investing is for those who don’t believe in following the herd. The contrarian investing strategy does the opposite of the masses; if everyone is panicking and selling their stock, then they do the contrary and buy stock. As Warren Buffet said, these investors tend to be “fearful when others are greedy, and greedy when others are fearful.”
Primarily, growth investors are in a stage in their life where they are mostly concerned with apparition; consequently, growth investing is a strategy that focuses on capital appreciation over long periods of time. Growth investors invest in companies that exhibit exceptional growth or the potential for it, regardless of the share price. These kinds of investors tend to target investments in swiftly expanding industries. This strategy mostly appeals to people earlier in their investment career and are willing and able to take the risks required.
Once investors are past the growth investment stage of their life, they generally become less willing to take risks and want to start utilizing income investment strategies. This typically means that a person has reached a point in their life where they are older, retired, or close to retiring. They have already amassed their portfolio and are now more concerned with making investments that generate a passive income that they can live on in their later years. This helps to ensure the preservation of wealth to be passed on through generations.
Preservation of Capital
The preservation of the capital life stage is the final life stage for most consistent, high-end investors. After a lifetime of risk-taking and wealth-acquiring, these investors use their latter years to live off of and enjoy their hard work, with their main focus being to preserve their capital for their children, grandchildren, or other beneficiaries.
Many investors worry that the COVID-19 pandemic will ruin stock portfolios with the economic impact it has wrought everywhere. This is true in many cases, however, the effect caused by closing down the economy has also created tremendous scenarios for growth and expansion in several areas. While airlines and recreation are severely affected, along with retail and restaurants to a large degree, there are other sectors that had explosive growth, such as technology, real estate, automotive. Before deciding when is a good time to start investing, you must first pick and choose the appropriate allocation. This will be a matter of focus and research while keeping diversification still the primary goal of your overall portfolio strategy.
Everyone expected the market downturns that occurred as a result of the spread of COVID-19. What they didn’t expect was the resilience and strength the markets demonstrated soon after the initial fall. Even though the Gross Domestic Product forecast fell precipitously, the markets all responded as though it was February 2020 and not April 2020. Unemployment exceeded levels of both the Great Depression in 1929 and the recession in 2008, yet consumer confidence remained high and stocks stopped declining quickly. When the Dow Jones Industrial Average rose above 25,000 at the end of May, the other indice responded accordingly and since that time, each indice has returned to growth mode with the NASDAQ and others achieving their highest levels ever.
At a time when many consumers in America were without income, you would think they would be relying on credit cards to survive. However, according to Forbes magazine, credit card debt in America went below the $1 trillion level in May of 2020. That hadn’t happened since May of 2011. Personal savings increased at the same time indicating consumers were creating their emergency funds to deal with the pandemic’s fallout. What it means is at a time when the world was in disarray, Americans were concentrating on prudent financial decisions.
A Good Time To Invest or Not to Invest; That Is the Question
So is now a good time to invest? Savvy investors know an opportunity when they see it and the COVID-19 pandemic may have crippled or hurt some industries and businesses, but it has also opened up the door to growth and expansion for many others. Finding the best investment options that meet your individual goals shouldn’t be difficult with all the resources available. Investment professionals, online resources, and many other outlets can provide a plethora of information and data for consideration. The first step, like always, is deciding to get into the game. If you are wondering when is a good time to start investing and you’ve been riding the fence to hedge your bets to see what happens, it’s time to climb down and get going. Contact Us for more information.
Sheheryar Shah is responsible for leading mergers and acquisitions activity for current portfolio investments, developing and accessing investment opportunities, providing strategic management support, and monitoring investment performance. Before joining the company full time in 2016, he worked as a strategy and finance consultant for ZT several years.