Investing in the Age of COVID-19

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The COVID-19 pandemic has led to jaw-dropping volatility in both the U.S. and global stock markets. A month and a half ago, the stock market experienced the fastest 10% drop in its history. It has since broken that record several time over.

The stock market has experienced more swings in the weeks since the pandemic began than it has at any point in the last 12 years. Such uncharted territory means that the investors mindset will have to adjust.

Learning From the 2008 Crash

Because the near future remains unclear, it can be useful to take a look at history. 

First, it’s important to note that every bear market that’s ever occurred has been followed by an active and lucrative bull market. Long-term investors must keep in mind that this is a temporary situation.

Second, we can look at the shape the market trajectory taken between November of 2008 and March 2009. During the 2008 crash, the market declined by around 8% in December before making a quick rally in January. After this point, it plunged even further, down about 28%. This is to say, it’s likely we haven’t seen the bottom yet.

Some keen investors who picked up shares in late 2008 made a great profit by January. Then, as the market persistently declined over the next couple months, many got cold feet and sold, feeling silly for thinking they had previously seen the worst of it.

However, the ones who held on through the further slump—those who were focused on the inevitable future bull market—made a fortune. From March of 2009, the stock market is up around 250%, representing over a 300% when dividends are included.

This is all to say, there’s no need to worry about waiting for the market to actually bottom-out. On the off-chance this is the bottom, it’s a great time to invest, and if it’s not, then as long as you don’t sell anytime soon, it will still be a hugely lucrative decision.

Be a Bull in a Bear Market

Try to channel the aggressiveness of a bull right now. If you have money to spare, maybe even from a stimulus check, buy now and buy a lot! There’s no need to be overly cautious because the market can only go up in the long-run. If you don’t have the money to spare, maximize your 401k contributions for the next few months.

Don’t be fearful of investing right now. As they say, when you’ve hit rock bottom, at least you know you’re on solid ground!