How to invest in a post-COVID-19 world? This is what everybody is asking. The pandemic took us all by surprise. Many businesses have closed, some are waiting for the restrictions to be lifted while others have gone bankrupt already.
The economy is going through a crisis and things are changing. Industries that were prosperous before the pandemic, like tourism (hotels, airlines, cruise ships), event planning, and other non-essential businesses like beauty salons, have been hit very hard and there is no saying if they will manage to get back on their feet after the pandemic will be gone.
Even physical stores and commercial real estate have suffered because now the vast majority of people shop online. Companies that used to rent office spaces now have allowed their employees to work remotely from home.
We don’t know if, and, how many of these changes will be temporarily and which ones are going to be permanent. With so many uncertainties it’s extremely difficult, almost impossible to predict how the market will evolve.
That’s why we hired Minuca Elena to reach out to 45 financial experts and ask them:
What is the best way to invest in a post-COVID-19 world?
Keep reading to see what they had to say.
The best way to invest in a post-COVID-19 world is to buy low-cost index funds or ETFs (exchange-traded funds) where you can buy many companies in a fund. This will help provide diversification in your investment portfolio.
By passively investing in the stock market, you can generate capital gains and dividends over the long term. If you are worried about timing the market, then you can try dollar-cost averaging where you spread out your investment over a time period and buy in the market highs and lows.
This helps to reduce your risk and you don’t have to worry about finding the best time to buy shares.
Jeremy Keil – Keil Financial Partners
Personal investing has not radically changed since COVID-19. People should still focus on areas that they can control such as how much they spend, when they retire, how they take their social security, and planning out their taxes to their advantage. Your personal decisions are far more impactful to your financial success than the ups and downs of the stock market.
When it comes to your investment decisions you can control how much risk you take and how you react to the stock market, but you can’t control your returns. When you start with the right level of risk and have a good buffer of money in the bank then you are more likely to do the only thing that’s ever been proven to beat the stock market: rebalance!
Our investors were rebalancing out of the stock market in Winter 2019/20 and were rebalancing back into the market in late March 2020 near the COVID-19 stock market lows. Now that the market has reached all-time highs again in late August we were rebalancing clients back out of the stock market – not to time the market or predict it will fall, but to make sure they kept their right level of risk.
Brian Davis – Spark Rental
When the Federal Reserve lowers interest rates near zero, bonds pay little in the way of returns. So investors look elsewhere, piling into the stock market and driving up stock prices for example – part of why stock prices seem so far divorced from the economy at large.
Investors have also looked to real estate. Home prices are up 5.5% from July 2019 to July 2020, the most recent data available from CoreLogic. But that nationwide average only tells half of the story. Real estate values in smaller cities, suburbs, and rural areas have jumped up year-over-year, while property values in the most expensive cities (such as New York and San Francisco) have floundered.
With stocks and real estate priced so high, we’ve put more of our money into two areas: income-producing properties, and short-term purchase-rehab loans to investors. We invest in the former because the returns are predictable, based on market rents and prices. You can literally run the cash flow numbers in a matter of seconds using a rental income calculator.
We invest in the latter because they remain enforceable, unlike homeowner mortgages. Lenders can still foreclose on real estate investors during the pandemic. And with property prices up and loan-to-value ratios down, these loans remain safer than most, even as returns are higher than most.
Lou Haverty – Financial Analyst Insider
I have always been a buy and hold investor using broadly diversified low-cost index funds. I believe in making investments in regular intervals in order to capture the benefits of dollar-cost averaging. The weighting of different asset classes should always be guided by the investor’s holding period (more conservative as you get older).
In a post COVID world, I still believe in that same fundamental philosophy. However, I also think it makes sense to pay close attention to signs of a black swan event like the pandemic.
Normally, I do not advocate for short term trading, but when you see signs of something very negative, it makes sense to consider making a temporary shift into a very safe asset class like short term treasures.
Trish Tetrault – Fit Small Business
One of the best places to invest during the current market is real estate—especially in areas that have been greatly impacted by the pandemic.
‘Safe areas’ are seeing a boom in real estate sales as people are seeking to live in areas that have been less impacted by the virus, as such the real estate market in those areas has swiftly become a seller’s market.
However, the areas that have been most impacted by the virus will see real estate values that favor the buyer. In many cases, these areas are/were those that were in high demand pre-pandemic and will likely be in high demand again once the pandemic is over.
Drew Cheneler – Simple Money Lyfe
Post-Covid, the best way to invest is by dollar-cost averaging. This strategy allows you to automate your investing experience. By investing an allocated amount each month into your investment account, you avoid “timing” the market which is nearly impossible. No one can predict with 100% confidence whether the market will rise or fall, so why try to?
With dollar cost averaging you avoid the ups and downs, yet you still capitalize on investing in a down market and only investing a little bit when the market is near all time highs. Overtime, dollar cost averaging allows you to come out ahead. You get to capitalize when the market is near its lows because you are still investing. Regardless of the current market environments DCA keeps you invested.
Furthermore, this strategy is used by the legend himself, Warren Buffett. So, if you want to invest like the oracle in Omaha then start by dollar-cost averaging. It easy to employ, powerful, and convenient – providing you peace of mind. The best way to make the most of this strategy is to invest in two-three low fee index funds. This keeps you diversified and investing in specific indexes that align with your financial goals and risk tolerance.
They say a recession is “when your neighbour loses their job, and a depression is when you also lose your’s”.
While I don’t believe the Australian economy is in depression, many have lost their jobs already. and an economic hangover is almost a certainty.
Here are my following tips to survive the recession.
The current events are outside of our control. While we can’t do anything about this, it’s important to focus on what we can be doing and keep busy with the areas of life that we can control i.e. health, relationships, education, and spiritual growth.
See this as an opportunity to improve and make a change. This may involve a change in career, additional education, maybe even starting a new business after seeing a new need/business.. A great example is distilleries now selling hand sanitizers.
Review everything that is costing you money, with a view to save on outgoings. This includes phone plans, credit cards, electricity providers, rent and/or home loan expenses.
With the savings you have achieved (see tip 3) keep these in an account that can build up and you can use for emergencies (3-6 months of your expenses is ideal to have saved up). If you already have an emergency fund then direct these savings into paying down any loans or use it to build up your investments.
Get help. There are free financial counselor services you can access too.
Shawn Breyer – Dough Hackers
If you’re a newer investor and you want to invest post-COVID, the safest way is house hacking. You can buy a house with a basement or a duplex and rent out this extra space. House hacking allows you to pay your mortgage with the rental income, which means you will eliminate your housing expenses. Saving that much money each month will allow you to take a hit financially in the event of a post-COVID recession and still be able to stay afloat.
Then, when the recession passes and you recover financially, you can move out of that property and rent it out. With the money that you saved from not paying a mortgage, you should have enough for a down payment on your next house. The cash flow that you receive from the rental property will help you pay for the mortgage on your new home for your family.
Billie Christofi –Reventon
In post-COVID 19, we need to be even more cautious of entering into property where the figures stack up and there are ample buffers in place. Invest in areas where affordability is a primary factor to minimise risk and being able to hold onto the property long term regardless of the market conditions.
Choose areas where unemployment rates haven’t been hit as hard, as the market will still be active with demand and the rental market in those areas will have lower vacancy rates due to affordability. This keeps property prices stable and vacancy rates lower which is what you want as an investor.
Look at regional areas as people are adjusting to working from home and the need to commute to the city is decreasing. Affordability is a lot higher in regional, especially areas like Geelong, that have done substantially as it still gets all the benefits and grants of being regional but is the second biggest city in Victoria.
Australia is becoming a less city-centric country and with the flexibility of working from home, the affordability of regional areas makes it more desirable for affordability to get the property you are after, a house in regional could cost as much as a unit in the city.
Paw Vej – Financer
It’s a good idea to follow a long-term strategy, whether we’re talking pre, post, or during COVID 19.
That way you don’t necessarily have to change your strategy too much if you’re investing in the stock market.
Historically, the stock market has seen an average return of about 7-8% per year adjusted for inflation, though this return has come with many ups and downs.
All that being said, it’s wise to be aware of the consumer trends that have occurred during COVID 19 and might continue to occur post COVID 19.
Some of the major trends are the shifts towards working from home and shopping online. Tech companies offering video conferencing tools, social networks, streaming services, online shopping, and more have seen huge increases.
The pandemic gave these trends a big push, but they were already happening before, which suggests that they have come to stay.
It’s also worth noting that some of the industries that have been hit the hardest by the pandemic most likely will rise again.
I’m talking about the tourism industry where flight companies, hotels, and event businesses will be in demand again, in a post-COVID 19 world.
Mark Kantrowitz – Saving For College
The best strategy is to remain continuously invested. Trying to time the market does not work, and even a small error in timing can cause you to earn less than if you remained continuously invested.
If you are investing in individual stocks (which you can’t do in direct-sold 529 plans), the general advice is to avoid investing in travel, dining and entertainment. These are sectors that won’t do well until the pandemic is a distant memory. Otherwise, investing in broad-based marketing indexes is a good long-term strategy..
Overall, there will be increased volatility, so you will be facing increased risk, not just increased returns. Today is a good example of the big swings one can expect. If your risk tolerance can’t handle the heartburn, invest in something safe that has no risk of loss to principal.
As always, minimizing costs is the key to maximizing net returns.
Anna Barker – Logical Dollar
When people ask me for advice on investing in a post-coronavirus world, my response is always the same: keep doing exactly what you were doing before the pandemic.
Those of us investing for retirement are playing the long game and it’s inevitable during the decades of commitment to this investment strategy that there’ll be both highs and lows. It is definitely a significant low right now but while we may not know when it will end, history has shown that we will come out the other side and the market will stabilize eventually.
The fact that this trend will likely repeat itself several times throughout your investment life (although hopefully not linked to a pandemic!) means you have to be comfortable with these ups and downs.. If you’re not, such as if you’re considering changing how you invest post-COVID-19, it’s time to take a second look at your risk appetite and adjust your investment strategy accordingly.
In addition, it’s been established that those who continue to invest regularly, no matter how the market is performing, will end up with the strongest portfolios by the time they retire. This shows that the best way to invest both in the current situation in which we all find ourselves as well as in a post-COVID-19 world is exactly the same: keep doing what you’re doing and settle in for the long haul.
Dominic Beattie – Savings.com.au
It may not sound as glamorous as the expert investment techniques utilised by Wall Street supremos, but simply investing your time into getting better deals on your biggest household bills, such as your mortgage, can make a big difference.
While there’s money to be made and lost on the stock market, you’ll be amazed at how much money you could make for yourself by simply lowering the interest rate on your home loan. Even half a percentage point off your rate could generate tens of thousands in savings over the life of the loan. That’s a lot less money for the lender, and more money for you to spend or invest with.
In tough economic times, trustworthy borrowers are very valuable to lenders, so if you’ve got a good credit history and plenty of equity in your home, you could be in a great position to bargain with them for a lower rate.
Likewise, you could be saving thousands a year on your insurance, phone plan, internet plan, and utilities. The market for these products moves pretty fast. If you don’t stop to look around every once in a while, you could miss out on some great offers.
Andrew Cremé – Retirement Planning Financial Advisor
When we think about investing in a post-COVID 19 world, there’s one-part strategy and one-part tactics that need to be accounted for. When it comes to strategic planning, you should consider investing:
Invest with the long term in mind
Have a game plan or ideally a financial plan that looks to your future goals. Sometimes when we focus too much on the instrument we are using, we end up being far off from our target.
Don’t forget about cash on the sidelines
Everyone needs an emergency fund, but now is a good time to make that emergency fund a little bigger. What that does is first, it gives peace of mind that no matter what happens to your investments, your day to day is the same financially. Second, it provides you with “dry powder” as we say in the industry, so that when an investment opportunity arises, you can take advantage of that opportunity.
Taxes will always be important
People think that getting into the market is the best way to take advantage of downturns, but there’s also opportunity to move things around in a tax efficient manner. If you have non-retirement accounts, you could potentially get a $3,000 per year deduction, or if you have pre-tax accounts, doing Roth conversions may save you a lot in taxes in the future.
While COVID 19 has brought a lot of change and volatility to the market, the fundamentals of financial planning still remain.
Because I believe sustainable investments are more resilient than non-sustainable investments and the data backs that up, my advice to anyone looking to deploy capital in a meaningful way would be to align their personal interests and morals with the type of investments that they make.
What this means in practice is doing due-diligence and research into the ethos and corporate conduct of the businesses and products that they use themselves.
We can all predict and assume that large technology stocks will continue to rise at a hyper-inflated rate at which they have but when you’re looking for long-term investment looking at truly sustainable and impact-oriented opportunities like impact ETF or E.S.G. indexes are a great way to make a broad bet on sustainable funds and businesses.
Marco Sison – Nomadic FIRE
This pandemic showed us that remotely working from home is viable and, in many cases, the preferred way of working. My suggestion for people is to invest their time and effort into getting a full-time remote job they can do while working abroad. I am an ardent proponent of using Geographic Arbitrage to increase savings and investments.
One of the first steps Financial Planners recommend in any financial situation is to reduce your monthly living expenses. An out-of-box, but extremely effective way to significantly decrease your costs is moving to a cheaper country. You can cut your monthly expenses by up to 70%, just by jumping on an airplane.
Reducing your living expenses overseas while working on a US salary can save you $20,000-$30,000 per year. That is money invested in the stock market or used to pay off your student bills.
As an example, I have lived in 10 countries while visiting 40 countries over five years. I travel perpetually to save money. As an example, the average salary in the US is $3,700 per month. Since January, I was enjoying life in the Philippines, spending roughly $1500 per month.
A person working a remote job in the Philippines could be investing $2,200 extra per month. The low cost of living in the Philippines includes a fantastic life with an active social life, a nice apartment in a trendy part of town, frequent dining out, and maid service.
Want to invest and save more? The rough few months in the stock market at the beginning of the pandemic convinced me that we would be in for an extended economic rough patch. I researched several countries where I could get a long-term visa that had a lower cost of living than $1500 per month.
My choice is Turkey, where I estimate my monthly living expenses will drop to $800-$1000 per month. Last month, I braved a 20-hour international flight to move to Antalya, Turkey.
Chris Rawley – Harvest Returns
One of the best ways to invest in a post-COVID 19 world is to build a highly diversified portfolio that is hedged against future market shocks. The stock market has proven highly volatile in 2020 and bond yields remain at historical record lows.
Alternative investments provide a mechanism to allocate some portion of a portfolio into tangible assets that are not correlated with equities or fixed income, which can produce both current yield and long term appreciation. Examples of non-correlated assets include timberland, precious metals, real estate, and farming.
Additionally, COVID-19 demonstrated that many sectors of the economy are heavily reliant on fragile supply chains, including food distribution. Investing in businesses that will thrive during times of economic uncertainty is essential to keeping a retirement nest egg intact during market corrections.
A variety of online platforms provide investors access to private companies that are working to build more robust infrastructure in sectors such as agribusiness and healthcare while remaining isolated from the volatility inherent in publicly traded securities.
New investments into regenerative farming, as well as local and sustainable agriculture, will be needed to shift America’s production to accommodate supply chain disruptions while keeping food secure and affordable for everyone.
Adem Selita – Debt Relief Company
Investing in today’s market and economic climate has not been easy! On the one hand you do not want to fight the FED and the easing monetary policy currently in place.
On the other hand, the FED is printing trillions and the value of the dollar is sure to wane in the near to intermediate term future. We are also currently in a recession and the “real” economy is showing little to no sight of a rebound.
Likewise, the stock market appears to be euphoric, other asset classes seem extremely highly valued and real interest rates are negative. With so many different variables to keep in mind, what do you do as investor?
Diversify & evaluate the opportunity cost of your money. With inflation being a main concern for anyone in the near future you do not want be sitting in all cash but you also don’t want to be in only high-risk and highly valued assets like stocks.
My recommendations: Invest in real estate with a good cap rate that will pay for itself and grow in the long term. Do not leave money in high yield savings accounts as you are not even beating the expected inflation benchmark by doing so.
Keep winners in the stock market but do not be afraid to take some cash and diversify with other assets, whether it be cryptocurrencies, value & dividend stocks (which will not be severely affected by economic uncertainty), bonds, etc.
This may seem a bit boring, but I believe the best way to invest in a post-COVID world is the same as the best way to invest in a pre-COVID world – broad based low-cost passive index funds.
Most of the research shows not even the best investment advisors can predict the future long term in a way that allows them to consistently beat the market by enough of a margin to also cover the costs of their services.
I personally believe clients should make their money and focus their attention on what they do as a primary source of income, and then let their wealth grow without a lot of fuss.
Dennis McNamara – wHealth Advisors
There seem to be more questions than answers when looking out at the investment landscape in a post-COVID 19 world. For starters, here in the US, our Federal Reserve has indicated that interest rates will be incredibly low (effectively 0%) for up to the next five years.
Following the Great Recession, the low-interest-rate environment spurred tons of investment and an especially strong recovery in the hardest-hit sector of the economy: real estate.
This time however, for real estate specifically, we’re seeing more activity in the residential space. The low interest rates seem to be more of an appeal to the urban dwellers who are leading a mass exodus from the cities in favor of more space in the suburbs. In terms of commercial real estate, and unlike in 2008-09, multinational companies have announced growing their ranks of remote workersand decreasing their physical office space.
COVID 19 has accelerated the adoption of technology (specifically: remote work and remote meetings) to a degree that many analysts predicted was years off into the future. How this will translate and permeate our markets is still a highly debated question.
The losers in our current business (and interest rate) environment: Commercial real estate, Energy companies, Fixed Income investors
The winners: Anyone’s guess.
It is crucial to accurately identify the sectors that are booming for poised for astronomic growth after the COVID-19 pandemic. This doesn’t require some divine prophetic ability; historical data can give you an ample view of what lies beyond the coronavirus horizon in the investment space.
As usual, the most resilient sector to invest in during and after the pandemic is the technology niche. The two most handsome industries here are automation and eCommerce.
We have seen technology-leaning companies like Tesla experience an exponential surge in 2020. It is unsurprising that Tesla’s shares have rallied meteorically up to 500% for 2020 alone. Zoom too is partying like ’99 with profits shooting by 3,300% as reported its Q2 result!
Aside from these industries, transportation is set for an audacious rise immediately the pandemic clears up, guys like Union Pacific, J.B. Hunt Transport Services are set for a resurge.
When eyeing the most attractive companies to invest in the transport niche, you should look beyond the generic cluster of logistics companies, air freight companies, airlines and focus on specifics like fuel economy of the transport company, debt (considering their enormous need for equipment acquisition), COVID response, and how well they are currently coping with competition in their niche.
Personally, I favor transport companies that are leaning towards automation.
Andrew Boulden – US Finance Post
Most of the recent runup in the stock market since March has been driven low by tech and some pharmaceutical that is involved in the vaccine efforts.
The question I have is where does the money flow, now that everyone has the tech upgrades they need and possibly even scale back on those as things begin to normalize.
3 of the 5 worst performing sectors this year are utilities, consumer discretionary, and consumer non-cyclical. I believe all of these 3 of good tail winds to reduce risk if the market tumbles and will be some of the stronger sectors as things begin to normalize.
The utilities industry is a very stable industry and throws off pretty good dividends. As the fed continues a near 0 rate policy, bonds and CDs will have a very low interest rate pushing retirees and older investors in to reliable stocks with good dividends and this is where the utilities come in. Do not get me wrong, you will not see a run up like you did with tech here, but you will get some safety and strong dividends to pad your portfolio.
With the consumer discretionary and non-cyclical, my belief is that people will start buying things they had been holding off on since things started. The savings rate for US citizens is the highest it has been in over 20 years and that money will flow again and I believe it will primarily be in consumer discretionary and non-cyclical will also see a bump from more consumer spending.
This is probably a great time to look at rebalancing your portfolio if you had any significant positions in the tech sector and start moving some of those profits to the harder hit sectors that should protect you and possibly be the next big sector.
At all costs, I would avoid REITs. In talks with a lot of people, their companies are looking at selling their office space, pairing down on leased space, and moving to a more flexible space setup that covers a much smaller footprint.
Carli Smith – ML&R Wealth Management
The best way to invest in a post-covid world is the same as how you would invest in a pre-covid world. Stay the course and don’t abandon your investment strategy. A portfolio that is well diversified and has proper risk exposure based on your tolerance is built to withstand good and bad markets.
Many investors become tempted to reduce their equity exposure and go to cash or bonds because of the perception of where the economy is headed and the impact it may have on their portfolio.
Luckily, history is on our side when it comes to the years that follow a recession. Of the 15 US recessions that have occurred over the past century, 73% of the time, returns on stocks were positive two years after a recession began.
Deciding to change your investment strategy shouldn’t be driven by trying to guess what the market might do, particularly during a recession. Succumbing to this strategy could potentially derail your long term financial goals.
By staying disciplined and revisiting your investment strategy periodically, rather than only during periods of high market volatility, you give yourself the opportunity to have a better investment experience.
Jack Choros – Sophisticated Investor
The technology sector is on fire right now because more and more people are engaging in e-commerce as a way to order products and services while staying at home, so a juggernaut like Shopify might be a good investment, or Amazon, Google etc. That said, apart from choosing specific companies, I still recommend diversity no matter what kind of instrument or company people choose to invest in.
While emerging technology is always attractive in the companies behind work from home products and services like Zoom are taking off in terms of share price, it’s still important to balance out the overwhelming impact coronavirus is likely to have on the economy going forward. That means balancing your portfolio appropriately to account for hedging against the market and investing in things like precious metals or even digital currency if you believe in it.
As always, you still want to keep some of your money and blue-chip stocks like Walmart or index funds like the S&P 500, and if you have the money, perhaps a real estate investment might do you well. People always need somewhere to live regardless of the state of the economy.
As a last bit of advice. Keep in mind that the stock market and nearly every other form of investment has been skyrocketing since the coronavirus pandemic grabbed hold of the whole world in mid-March. As Warren Buffett says, ‘be fearful when the markets are greedy, and greedy when the markets are fearful’.
David Stein – Money For the Rest of Us
A post-Covid world is one of financial repression where central banks favor borrowers over savers by keeping short-term interest rates low and doing what they can to keep long-term interest rates low.
In that environment, cash flow yields and expected investment returns are low. Savers will have to save more. They will have to take more risk by keeping a higher allocation to stocks in order to benefit from earning growth.
Investors need to focus on total return, not just income. There remain some attractive income strategies such as preferred stocks and dividend-paying common stocks.
Alexander Volik – Tranio
Although property investments have been fluctuating for many years due to various declines, the general trend suggested that capital injections into real estate were on the rise. We do not see any reasons why this trend should reverse. Property still generates good relative returns compared to other asset classes.
Let’s look at the most resilient vehicle for investing in real estate – REIT. These trusts acquire, build, and manage properties through pooled investments. Investors buy REIT stock and become co-owners of a property.
COVID-19 impacted the REIT segment. For instance, real estate investment trusts in the USA went down by 8.2% on average in mid-May due to lower rent collection in all sectors. In April, REITs collected only 71.4% of expected revenue from shopping centres and retail spaces.
Now that lockdown is being gradually lifted, the largest market players in the USA and UK are re-emerging (e.g. Simon Property, Segro Plc). Some REITs generate steady revenue even in a crisis and recover faster than others. During the pandemic, these are the trusts focusing on data centres, storage spaces, and healthcare facilities.
REITs are resilient to market fluctuations and interest rate changes, as their loan-to-value ratio is sustained at no more than 30–40%. Following the 2008–2009 recession, REITs have been reducing financial leverage and increasing owned capital. When the recession set in, REITs were using 60–70% of borrowed funds to finance their activities.
During the 2020 global crisis, REITs are outperforming shares.
In early June, REIT indices rose almost by 9%, whereas S&P 500 and Dow Jones Industrial went up by 8.3%. REIT indices are expected to trend steadily upward faster than others, as was the case during the 2008 financial crisis.
REITs can bring higher returns in a crisis because they are tied to the real estate cycle, which lasts about 18 years. Shares are impacted more by the ups and downs of the economy – underperforming during recessions while real estate investments generate steady returns.
A REIT is a very good independent piece of an investment portfolio after the crisis. For the last twelve years, REITs showed the least diminishing returns compared to other liquid financial instruments, as well as resilience to interest rate changes and inflation, fast successful recovery in the post-crisis periods, and steady dividend payouts.
Scott Bates – Money And Bills
Based on my own research and what I’ve been noticing with my existing investments, here is my opinion on the best way to invest.
I’m keeping a lot of my net worth in appreciating assets with little volatility such as real estate, gold / silver, and well established blue chip stocks or ETF’s. I’m also keeping at least 25% of my net worth in cash so I have a rainy day fund.
The key to this strategy is that I have enough cash on hand for immediate purchases and everyday life expenses. But, at the same time, enough invested in assets like stocks or real estate which will appreciate to protect myself from inflation.
The FED recently released more dollars into the money supply and has spoken about averaging a target for inflation at around 2% going forward.
No one can tell for sure how this will all play out. But, I’m sticking to a strategy I know worked through the last great recession of 2008 based on my own experience. I’m also avoiding tech stocks right now which are built upon too much hype and not the fundamentals.
Sam Zelinka – Government Worker
I think index funds are a great way to invest money during the pandemic. We don’t know what the world will look like after the pandemic.
As things stand today, we have seen the travel industry get hit hard by the pandemic. No one wants to get on an airplane and business travelers aren’t filling hotels. Some people are speculating that business travelers will complete all of their meetings over Zoom in the future. Others think that business travel may bounce back sharply in a post-COVID world. Today both outcomes seem equally likely.
On the other hand, the pandemic has helped some companies soar to new heights. But it’s possible that they’ll fall back to earth once everyone has returned to their normal routines. Because we don’t know what the future will look like, index funds are a great way to grow your portfolio during the pandemic.
By investing in index funds, you are betting that after the pandemic the economy will grow. This seems like a safe bet. When things return to normal, people will spend money, there will be innovation, and the economy will grow. And as the economies grow and businesses profit, your index funds will grow too.
Tomer Arwas – Generation Nomads
In a post-COVID 19 world, I would recommend continuing to diversify your investment portfolio to different stocks as well as over time. While I would usually recommend investing in dividend paying stocks, and reinvesting the returns.
Post-COVID 19 requires investors to be extra cautious when investing in stock with the aim of dividend cashflows. According to Janusn Henderson asset management group, 27% of companies have cut dividends, half of which suspended dividends all together as a result of COVID 19.
There are several industries that are currently thriving thanks to COVID 19, while other are suffering serious losses. I would avoid industries that are deemed to struggle in the coming months or even years due to the pandemic. These include tourism, brick and mortar, amongst others. Instead focus on industries that are likely to benefit from the impact of COVID 19, such as health tech and communications tech.
As always, keep the portfolio diversified and avoid putting all eggs in one basket. Relatively cheap financial instruments such as ETFs are useful to gain a broad diversification. If we go into a bear market, hold your positions. Use the opportunity to buy rather than sell.
Jonathan Hess – Hess Financial Coaching
My main takeaway from all of the effects COVID has had on the market is a re-emphasis on long-term investing. We’ve seen dramatic growth in the stock market over the last few months, which has been an almost polar opposite trend of the world sentiment. This just proves that no matter how skilled you are as an investor, no one can truly time the market.
In addition to that, the last few months have shown that markets and price movements can be counterintuitive to the traditional metrics many use to measure the health or attractiveness of a particular investment. Index funds and other passive investing options continue to prove to be attractive options in any conditions.
On the housing front, real estate has largely shown to be relatively resilient even through the pandemic. Although partially driven by historically low-interest rates, housing prices have largely remained flat. This is not necessarily reflective of every geographic area in the United States, but the initial fear of 2008-type effects happening were blown out of proportion in hindsight.
There could still be a situation where we just aren’t feeling the effects that COVID has had on the nation and the globe due to the recent expiration of many economic impact stimulus policies, but only time will tell.
Shaun Morgan – Simply Know Money
Everyone keeps asking what the world will look like post-COVID 19 and while that is an important question, a question that is perhaps more important is how is the world the same? Investing really hasn’t changed much because the basic principles of investing are meant to handle situations as extreme as COVID-19.
Good investing has three major principles, those are: diversify and minimize risk, reduce fees, and invest for the long term.
1. Diversify and minimize risk are hugely important principles that everyone seems to forget whenever there is a major crash. The “don’t put all of your eggs in one basket” principle is good because you minimize the risk of losing all of your money. If you have invested broadly across multiple industries within and without the stock market the chances of your losing all of your money are basically zero.
If you do lose all of your money because there is a situation that is so bad losing all of your money will be the least of your concerns (for example, a meteorite hits the planets and a mass extinction occurs–sorry to be a downer, but that is the truth).
2. Reduce fees is another important principle because regardless of how well your investment is doing (on up years and down years) the fees still get taken out every month or year. Therefore, the higher your investment fees are (usually called an advisory fee or a management fee) the less money you will have in your account regardless which is bad for long term growth.
3. Invest for the long term is the last principle. If you are investing for the long term a major dip is NOT a time to be concerned but a time to stay calm. As the market goes down you have not technically lost money UNTIL you pull that money out of the market. Barring an end of the world situation, the market WILL come back. So just wait it out. Even better, invest in the bottom and ride it up to the top. Investing should not be looked at in the short term.
The people that lost their shirts in the COVID dip are the people that were heavily invested in one sector that lost considerably (not diversified), had a high-fee actively managed account (didn’t reduce fees), and pulled their money out of the market “before I lose any more money” which turned their loss on paper into actual loses that are all but impossible to recover from (didn’t invest for the long term).
So what does that lead to on a high level? Post-COVID 19 just keep investing in a diversified, low fee investment for the long term. I would recommend index funds, but mutual funds and REITs can also be good to mix into your investment. It just depends on your goals. But keep investing!
On an individual level though, many things may have changed. How did you react emotionally when your investments dropped dramatically? How did you feel as the stable growth of more than a decade was wiped out? If you were freaking out, then it might be a good idea to change your investment strategy after things calm down.
Try something with less risk like bonds, or keep more cash on hand in case of emergencies. Make sure that you are ready and comfortable just in case something else this widespread and catastrophic happens again. Even if it doesn’t it will help you sleep at night and will strengthen your overall investment position.
Lauren and Steven Keys – Trip Of A Lifestyle
We’re big believers that pretty much any time is a good time to get into the market, as long as your intention is to stay invested long-term. And that the same advice applies today as it did yesterday and as it will tomorrow.
It’s more important to consider your own age and investing goals rather than the current state of affairs. No one can predict the future, so investment advice is all based on historic stock market performance.. The broad stock market has a long history of increasing in price and paying dividends over the long run. Whenever you wait to invest, you’re likely just consigning yourself to pay a higher price for those same shares later.
We started investing when we were in our early 20s, almost a decade ago now, so our portfolio tilts a little more toward high-risk, high-reward asset classes, like equities, instead of safer bets like bonds. We also have a longer time horizon until we draw down our portfolio, which allows us to weather the volatility of the stock market without selling.
A lot of new investors have a tendency to gravitate toward exotic strategies like options trading, forex trading, and cryptocurrency speculation. The lesson most experienced investors learn over time is that a simple, passive index fund investing strategy pays off better in the long run, and it takes less energy and thought to maintain as well.
Dejan Ilijevski – Sabela Capital
Invest after you save at least 6-9 months’ worth of expenses.
Investors are desperate for yield and may be more risk-seeking, susceptible to high-cost schemes, “exclusive” strategies, and financial services salespeople ready to take advantage. Your best bet is a fiduciary advisor who is not paid on commissions or confusing fee structures.
Especially now, stick with low-cost index funds and etfs.
ESG standards remain unreliable and greenwashing is rampant; however, legitimate ESG funds have been doing extremely well and are a great option for investors post-covid.
Discount trading platforms, like robinhood.com, are popular these days. Many reasons for this, including the lack of sports betting due to COVID. There is also fear of missing out by seeing so many success stories on social media from those who have killed it buying stocks distressed by COVID. Day-trading is a get-rich-quick scheme, might as well go to Vegas. it’s the wrong way to invest and a losing strategy over the long-term.
Considering the political and economic uncertainty, the best bet post COVID is to rely on a globally diversified portfolio of low-cost index funds. If the US stock market struggles, owning stocks in the developed countries outside the US and the emerging markets allows capture of returns wherever they may occur next.
The best way to invest in a post-COVID 19 world is philanthropy. As Melinda Gates says, “Our humanity is the one thing that we all have in common,” philanthropy is the love of humankind.
As the US Trust Study on High Net Worth clients and Advisors indicate HNW clients would like advisors to bring up philanthropy discussions early and often in the relationship.
Benefits for the client include solving personal, financial, and legacy goals. This is It the comprehensive plan includes a client’s personal, financial, and legacy objectives.
According to Micheal Norton, associate business professor at Harvard, “Money can buy you happiness if you stop spending it on yourself and spend it on others. “
Unfortunately, due to COVID, I am not flying as much as previous so my income has drastically dropped. I am on a sabbatical until the end of 2020 and am using this to spend quality time with family and friends, as well as learn, read, and engage in the financial independence and investing community.
What are some things that have changed? Well firstly I have massively liquidated my physical possessions and slashed my living expenses – I have been selling gadgets, toys and things like gym equipment, which I have put into increasing my emergency fund cash buffer by over double, as well as used this extra cash and savings to try and pick up extra shares of companies whilst the price is depressed.
When it comes to COVID-19 and investing, my investing style has not changed a great deal. I continue to dollar cost average into good quality, profitable companies through a combination of total market index tracking Exchange Traded Funds (ETFs), as well as good quality, old school, low management fee Listed Invested Companies (LICs). This includes Australian domestic, US domestic, and global markets.
I have also been transitioning from a higher proportion of LICs which begun trading at a significant premium to net asset value (8% or so) and selling them and buying ETFs which always trade at fair value.
I have further begun investing in my own business and websites, undertaking web development and webmaster training courses to diversify my income stream further and not rely on my sole income as a pilot. With this, I have been able to invest only a few thousand dollars but now am in a position where I own a portfolio of sites that are generating around $500 per month.
On advice from an accountant, I also crystallized losses in shares by selling the ones I did not particularly want to hold long term (for example index funds with higher management costs than I would prefer) and then instantly rolled this cashback into investments in a similar asset class but with lower fees. This allows me to carry forward capital losses to offset future capital gains.
Gordon Polovin – Wealthy Living Today
The best thing about the term “post-COVID-19 world” is 20-20 vision. The fly-in-the-ointment centers on one question- “Are we in post-COVID or the middle of it?”
In my view, we can learn from both these positions. To think “post-pandemic” or “midst-pandemic” is not helpful one way or another.
We are in a new norm that’s likely to last for a long time.
Moreover, it’s changed our collective mindset to one pillared in wariness, caution, and not taking anything for granted. That won’t alter for many years.
As far as investments go, the issue is not all that complicated.
Invest in businesses on the right side of the “virus divide”.
Distance yourself from those suffering (and likely to continue that way).
(1) above includes mainstream online retailers, delivery businesses, technology (an evergreen), health, home gym equipment, hobbies, streaming entertainment, supermarkets, pharmacies, home entertainment, etc. Netflix, Peloton, Amazon, iPhone, Dominos, FedEx, Walgreens, and Walmart are good examples.
Look out for groundbreaking technologies, vaccine-developers, and health-centric enterprises that are mitigating the COVID-19 ills.
The wrong side of COVID-19 includes:
- Travel (all airlines)
- Hospitality (all hotel chains)
- Dine-in-eating franchises (like Mortons)
- Brick-and-mortar retailing (many are going belly-up as we speak),
- Any business that involves human crowding.
It’s mostly common sense. If the “wrong industries” flip back, it won’t be overnight. Expect a very gradual recovery. You’ll have time to get back in. in most cases, look out for moves to reinvent themselves in compelling ways.
Leif Kristjansen – FiveyearFIREescape
Two main sectors I’d invest in the post-COVID19 world are the following:
Technology: Digitalization is a non-stop process. We live in the world of computers, artificial intelligence, and digital reality. We all can feel its irreplaceable presence especially during COVID19 and our dependence on it in quarantine. Online education, the entertainment sector, automated real-time processes have undergone rapid growth. Startups are where I look to have my next investment in.
Socially Responsible Investment (SRI): Socially responsible investing is a good way to pursue your goals and it’s getting HUGE!
One thing COVID19 came to teach us is solidarity. I have no doubt in my mind that 2020 will go down as a “social activism year.” With every challenge, people are rising to the occasion and opening their eyes to what they can do to create a change they want to see.
SRI’s popularity is already growing like crazy world-wide
There’s no significant downside compared to index funds (the gold standard of stock market investing)
Millennials and Gen Z – are pushing the trend upwards
Fund managers back SRIs for risk-aversion purposes and are planning for a significant increase in demand
It’s good to invest in causes you care about.
While there are more ways to invest in the post COVID19 world, as an investment and finance expert I believe these two are the biggest on the international stage at the moment.
Freya Kuka – Collecting Cents
Your first option should be to start an emergency fund if you do not already have one. We do not know how badly this is going to affect jobs, the economy, or our lives, and for how long. Having a savings account that can keep you above water for 3 to 6 months should be priority number one.
If you already have a dependable emergency fund, investing in shares is the best thing you can do right now.
Taking out money right now just because you think its gonna fall further may leave you with a loss but investing is a time game and the market always jumps back. If your long-term investment goals have not changed and you do not NEED money right now, stay put and invest further.
You are going to get to invest at rock bottom prices and reap the rewards later.
The market may seem a bit of a mess right now but this is not the market’s first rodeo. It will bounce back. Unless you are 62 and nearing retirement, investing right now is the best thing to do for your future self. You will make crazy profits when the COVID-19 craziness dies down.
Another option would be to pay off credit card debt, your mortgage loan, or your student loan debt. This would make more sense than investing if you have a lot of debt to pay off and a lot of interest making it worse. It could help you get back on your feet and take a step closer to financial freedom.
Especially now, when institutions may tighten the credit score requirements for people who are taking out loans (given the situation), paying off debt and bettering your score could be imperative to your future finances.
James Walsh – Billions in the Bank
Lifestyle, businesses, routines, and everything else has been affected by COVID. It has brought changes to the way of thinking, priorities, and investment approaches.
All these factors will continue to be influenced by COVID unless it is over. The recovery will be highly different in different parts of the world because the pandemic has struck everywhere with a different intensity.
So, there cannot be just one general rule for investment. It will vary depending on your location. A ‘W’ shaped recovery is predicted, which means a series of rising and declining in the financial industry. The best way to invest in these times would be to have a defensive investment approach.
Investing in quality companies will be the trend as they will continue to thrive and quickly make it through the struggling phase. You can invest in areas which are benefitting from the current crisis.
Two main sectors thriving in these conditions are digitalization and the healthcare sector. 5G will further help the growth of the tech sector, and will also play a vital role in the advancements of the healthcare sector.
Marc Frau – Opinatron
It’s clear, COVID 19 changed the world in many ways. But, to be honest, it hasn’t changed my investment strategy.
My favourite strategy is investing through index funds, easily diversifying. When investing in index funds, with just one operation you diversify in stocks, geographically and temporarily, and that’s why it’s my favourite strategy.
I don’t think COVID has changed that. It’s true, some companies will suffer, and it’s likely that the economy will resent, but I invest long term, so I’ll just keep using the same approach.
If the intention is not investing long term, and instead someone wants to invest short and mid term, Covid definitely changed the situation.
A lot of sectors and companies will suffer in the near future. Travel and tourism companies are a clear example. Instead, others like internet companies, could thrive.
Another option could be real estate, since it’s likely that we see a significant price drop, due to the coming crisis
There is just one sure thing. The most important thing is investing, because it’s a basic in personal finance, and covid hasn’t changed that.
Jeremy Britton – Boston Trading
Investing post-COVID19 is simple. Avoid magic promises of what is “coming soon” as a COVID19 vaccine may be years away, just like a profit for Tesla Motors. The following tips will assist you to invest simply, safely and securely for the longer-term
1. Create a cashflow plan (millionaires don’t have a “budget”, they have a “Plan”). This can be on paper or a spreadsheet, whatever is easiest for you
2. Track every single expense, no matter how small, for a minimum of 30 days, ideally 90 days. All successful millionaires do this for themselves and their businesses. A business or an individual who does not track their money will not be successful, it’s that simple.
3. Identify key areas where you can cut expenditure: eg. 10% less entertainment, buying in bulk, shopping around for better deals on insurance, utilities, and so on. Aim to save 5-10% on each expense (more if possible)
4. Once you have managed to identify savings, start a new account where you can set this aside every week or month. Pay yourself first before you pay the expenses. Aim for at least 5% to start with, 10% up to 20% is a sweet spot.
5. Use an online search engine to identify which publicly listed companies benefit from your unique specific spending pattern (yes, we refer back to #1, the “Cashflow Plan”).
6. Open an online trading account and invest in the companies who make money every time you spend. For example, if you pay a mortgage to a bank, you can invest in the bank by buying some of their stock. Ditto for groceries, fuel, and so on.
(Sometimes there may not be an easily identifiable parent company into which you can invest, eg. if you purchase electronic appliances direct from China, you probably cannot buy stock in that company. In this instance, you can use your detective skills to ascertain where the Chinese factory spends the money after you give it to them. For example, they may have to buy raw materials for manufacturing, such as copper, silver, gold, or plastic, and you can invest in the mining and industrial companies, not the manufacturers.)
7. Rinse and repeat. Soon, you will save up 10%-20% and start investing in publically listed companies with which you are familiar because you spend your money there. Over time, your #1 cash flow plan will change, so change your investments.
For example, after Covid19, you probably traveled less (sell airlines, sell Hertz), and used video-conferencing more (buy Zoom, Microsoft, or competitors). Your spending patterns will change again and again, possibly annually as you go through life, so be sure to keep your investments in line with your cash flow plan and be sure to “invest where you spend”.
This method will not make you a millionaire overnight (just like you don’t lose 20 pounds or become Mr /Mrs Universe overnight), but it will happen if you stick to the plan.
The great benefit is, aside from becoming wealthier, you don’t need to watch the financial news or keep abreast of any technical jargon. All you need to do is watch where you are sending money every month, continue to “invest where you spend” and change your investments anytime your spending changes.
Mason Miranda – Credit Card Insider
Investing doesn’t always have to be in the stock market. Sometimes, you need to invest in yourself and your personal financial assets to be able to invest more in the future.
Oftentimes it’s an excellent idea to invest in your debt before spending a lot of money elsewhere. By paying off your debt ASAP, you’ll free up more money in the long run to spend on other opportunities, and you’ll save money on interest and other possible charges.
The higher the interest rate on an account, the more money you spend on that debt. Consider putting money toward your higher-interest accounts first to lower the amount of money you’re spending over time.
It’s difficult to invest as much as you want in other areas, such as a 401K if you have high monthly payments on a loan or credit card bill. By paying off your monthly credit card statement, and eliminating other debt early, you allow yourself to put more into your 401K and other investment accounts.
Matt Hylland – Arnold and Mote Wealth Management
Don’t put all of your eggs in one basket. We have seen from this pandemic just how quickly the world can change. Those who were heavily invested heavily in airlines, hotels, energy, financials, or other industries impacted by the coronavirus have seen the value of their portfolio drop significantly.
Use some of the many low cost, diversified index funds available to build a nest egg that will be able to weather not only this crisis, but future ones as well. Total Stock Market index funds, whether from Vanguard, Schwab, Fidelity, or anyone else have costs (expense ratios) below 0.10%, and invest in thousands of companies. Likewise, Total Bond Funds invest in a variety of bonds from the U.S Government and highly rated companies with a wide variety of maturities. This will provide you protection from volatility in the stock market, interest rates, and inflation in the future.
Once you have found those high-quality investments, focus on what you can control and don’t worry about the move in the stock market every day. Look at your savings rate, can you cut expenses to save money? Can you earn extra income to save more? Being able to maximize Roth IRA savings, or 401(k) contributions will have a much more significant impact than constantly trying to pick better performing investments.
Andrew Geisel – Invest Like Dad
Whenever giving investment advice, the most crucial element is the perspective of the person seeking advice. For a newer investor, there is no better option than just investing in an indexed ETF that tracks the S&P500.
Experienced and self-directed investors should continue to ensure they have a diversified portfolio that is not over-allocated in any particular sector.
Technology stocks will probably be the best growth stocks for the long haul, but at today’s valuations, it is highly likely a rotation from tech to value will occur. That is why stocks in the following sectors are worth a look to invest in: banks, insurance, consumer defensive stocks, utilities, and telecommunication services. These stocks will benefit from a recovering economy, and investors can collect a dividend until that time.
Another change that investors need to factor in their investment decisions more than ever are the leadership team, regulators, government agencies, social and environmental impact. Investors used to only care about a stock’s profitability and if it hit the estimated numbers.
Companies are finding themselves in the spotlight, as we have recently witnessed from doing business in China or not having a diverse enough board. Of course, scandals and financial crime are never good, but as we are seeing with the banks right now that those reports are now reigniting calls to break up the big bands, expanding an investor’s regulator risk. Investors need to ensure they do broad research about a company outside of its financials when investing in the post COVID-19 world. That will be the “new normal” for investing.
Finally, we will probably continue to see investors using stable dividend companies as a bond alternative, which will keep equity valuations on the rise until inflation beings to creep back up.
Andrew Kraemer – Wallet Squirrel
You’ll find most financial advice falls into the category of set it and forget it. Those who don’t react to the market and hold their stocks are better off in the long-run.
The same applies to those who invest in dividend stocks, but comes with the added bonus of seeing dividends pour into their account on a regular basis.
That little extra money coming in, on a consistent basis, regardless of market swings, helps give investors the peace of mind to stay in the market regardless of storms. I expect we’ll see more dividend investors post-COVID who appreciate that extra comfort moving forward.
Thank you so much to all the experts that have contributed to this expert roundup! If you have any questions let us know in the comments below and someone from our team will reply as soon as possible.
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