In such crazy times like now, everyone is looking for a way to ensure that their personal finances are not just in order, but also have the potential to create a future of wealth for themselves and their families. COVID-19 definitely made several different areas of investment unclear regarding the future and scary for some who had assets in non-liquid entities such as the stock market, real estate, and bonds. However, as the world continues to fight this pandemic, hopefully this article will shed some light on the risks and rewards of several different options for people looking to invest now, as well as what some of the smarter investments would be.
The first major area of investment that will be discussed is the stock market, primarily larger stocks such as Fortune 500 companies. The main idea that will be emphasized is having good diversity in one’s portfolio. Putting large percentages of any liquid capital into just a single stock or only a few stocks may work in the short term, but in the long run it is advisable to make sure that money is spread across several different stocks. In terms of this diversified method, the best way is to invest in strong companies, such as Apple, Disney, or Tesla, that have consistently gained value in the last several years and are likely to continue for a long time. Larger companies in the Fortune 500 are fairly safe in the long run, as economic disasters like COVID-19 do not necessarily have the potential to wipe these companies out, where smaller start-ups may face high risk from this pandemic. With that being said, if you choose to invest heavily in the stock market, it is smart to buy shares of companies all across the board that are relatively large and safe. With that being said, the largest returns will come from smaller companies that have opportunities to grow largely in the next several years. So with a diversified portfolio, one should consider looking into some companies with high upside that may have cheaper shares. Consider companies that are built with the ability to grow in areas that have been thriving recently, such as tech companies that have softwares that are applicable to many fields, social media that have the potential to take off running, or any other type of innovation that may succeed. While the market may look meek right now with the recession, diversified portfolios have proven time and time again to be a profitable and safe place to put some money in the long-run, and COVID-19 likely will not change that.
In addition to the stock market, the opportunity for buying and holding bonds is slightly different. As interest rates and inflation increase, bonds are something that people should be a bit more careful about. For the stock market, diversifying is stronger and gives people the opportunity to buy a few different shares of companies that have potential for incredible returns. However, the bond market does not have return rates like the best stocks do. As for bonds, putting a bit of money into this market may be a good idea, but putting a lot may be risky. The recession makes municipal bonds riskier for sure, as many governments have a lot of compromising to make. The pandemic has forced local, state, and federal government spending to shift completely in order to fight and eventually defeat this disaster, and as the municipal bonds are issued by governments, there is less certainty in the safety of these investments. As for corporate bonds, they may have an upside, but it is more advisable to use that money and invest in that same corporation’s stock, as the stock market can create better returns.
The final area of investment that will be discussed is real estate. Real estate has had certain rules for years that have allowed investors in this particular field to succeed. For example, investing in urban property or locations that have the potential to become more popular and urban were smart, as the value of that real estate would continue to grow at a nice rate. However, the COVID-19 pandemic has shifted the way that many people decide where they will live, do business, or any other affairs that involve real estate. With that being said, real estate investments may have very high returns if people choose correctly, but it seems to be too much of a gamble right now. This is because the pandemic has shed light on the concept of working and living normal life from home. If the location of one’s home does not matter as much, people will not necessarily choose to live or do business in more populated, urban areas. Because of this, real estate does not have the safety that it used to have for an investor.
Overall, investing money right now may seem difficult, but finding the right areas to invest are essential to anyone’s success. Leaving money in the bank may lose value to inflation, so it is essential that people find these correct assets to invest in, especially in such a difficult time economically.
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