Bauerle Financial: Investing During COVID-19
Around the middle of the month of March, a worldwide panic due to COVID-19 triggered a massive sell-off across the stock market and in turn, ended the longest-running bull market in the history of the United States. As a result of the chaos, we are now entering a bear market for the first time in the past 11 years.
So you are probably wondering, what does this mean for my portfolio? If you're comparing your investments currently to what they looked like at the start of 2020, you may be upset with what you're seeing. But don't fret, there are opportunities that are arising to capitalize on. For example, stock prices have dropped across all the markets, so now is the time to buy-in to recoup your investments. No matter the market type, it is always possible to make smart investments. But it is still important to attack with the right strategies. Here are a few things to keep in mind during the bear market.
Don't Put All Of Your Eggs In One Basket
First and foremost, you should be thinking about how to minimize the losses you have already suffered. One simple way to do this is diversification. Investing in multiple stocks across different markets is a safe way to mitigate risk for your portfolio. Bear markets normally trend downwards, but not all stocks will plummet at the same time, and there is a possibility that some stocks may increase dramatically depending on certain trends within the market. Take a look at your portfolio and check if your assets are balanced between stocks, bonds, funds, and liquid assets that line up with your goals. By doing this, you can make sure to reduce your losses overall by having a well-balanced mix of winners and losers.
Keep Calm and Trust the Process
If your portfolio is well-diversified, you shouldn't be worried. Now is the time to trust your plan and see it through to fruition. Sticking to the script is vital, so fight the temptation to change the risk level of your current portfolio with hopes to make a quick gain. Bear markets can be painful, but it is important to remember that this pain is only temporary. Every time the stock market has encountered a bear market it normally leads to a hike up in stock prices not too far down the road.
Don't Try to Time the Market
Instead of the normal bear market strategy of buy-low sell-high, try an approach known as dollar-cost averaging. Dollar-cost averaging is making consistent investments of the same dollar amounts across an extended window of time. This approach allows your portfolio to build a defense against market fluctuations while building up your assets over time. It's a wise strategy overall, but during a bear market, it can really help keep you in the game. As Warren Buffet says, "it’s not about timing the market, it’s about your time in the market.”
Think About the Future
It is hard not to think about the present and the current situation of your portfolio. It's not easy to predict how long it will take to get out of this bear market. It's important to stay rooted in your plan and don't slip into the mindset of if you invest a ton while prices are low, you'll be rich by the end of the year. Although that is possible, it is not likely to happen. When thinking about what stocks to purchase now, think long-term. When you're deciding on your investments, assume that these stocks you purchase now are stocks that you will be holding for years down the road.
Make Smart Investment Decisions During This Bear Market