One of the main financial consequences of the COVID-19 pandemic was the huge stock market tumble that lasted throughout the March of 2020. In just 20 trading days, the stock market lost 30% of its value — pretty much the quickest decline ever experienced.
Naturally, saying that this was a dramatic moment for the world’s financial community wouldn’t be an overstatement. There was much panic among investors — even though the worst of the humanitarian and health issues of the crisis was yet to unfold.
As most highly consequential situations are — this pandemic was a big learning opportunity for everyone involved in the world of finance. And we’re going to explore what the smart and not-so-smart moves of the last year were!
Buy and Hold perseveres
Plenty of people are after a quick buck and constantly have the urge to sell stock when the time seems opportune. But apart from the possibility of monthly dividend stocks that can also be a constant source of income, this crisis showed that quick selling is just as stupid as most investors believe it to be.
After all, one of the investment golden rules is — you need to buy and hold. And that’s what the smartest people in the market were doing; finding excellent companies with lots of potential and holding them for a long time.
Warren Buffet once said that you shouldn’t hold stock for 10 minutes if you’re not prepared to hold it for 10 years. And that doesn’t just mean being patient and waiting to reap the benefits; you must also be ready to stand with a company where you’re a stockholder through some rough times — if you’re willing to bet that they’ll be successful in the long term.
This has always been the most promoted strategy — in theory. But in practice, plenty of investors panic, succumb to pressure and end up walking away. And there’s never been a crisis more striking than the one triggered by the 2020 pandemic. People who have decided to let go of stock because it plummeted a year ago have made a grievous mistake; reentering the market is a necessity, but it’s going to cost them a lot more now that the market has bounced back.
Pessimism doesn’t earn money
A lot of self-proclaimed stock market experts thrive on one thing — pessimism. Every time that there’s any notion of uncertainty, they’re quick to proclaim it as the proverbial financial apocalypse; that’s something the United States experiences about every 4 years, with the onset of every election.
And this approach became an interesting one to observe during the pandemic; especially in the early days when panic caused the entire market to drop down to an unprecedented low. Initially, most of the people who have sold stocks in this period were behaving irrationally and, ultimately, incorrectly. They believed that they were getting the cash and securing themselves, but the only thing they managed to do is to lock in their losses instead of experiencing the gain once the market started rising.
So, what has this process taught us? Never act quickly and dramatically; it’s not revolutionary actions that prevail in finance, but incremental and evolutionary ones. However, that’s not saying that this only happens to bad investors. Dealing with pressure is not always easy, and sometimes even the best of us panic — you can see that from the fact that Warren Buffet sold airline stocks when the pandemic began; however, the government bailouts proved that to be the wrong move.
Embrace volatility
Sometimes, waiting for the safest possible outcome is not the best thing that you can do. Sure, with everyone running scared thanks to market volatility, it’s pretty tempting to just sit back and wait for happier times. In reality, you’re risking missing out on huge gains by waiting for the market to be on the steadiest possible upward trajectory.
Instead, you need to embrace the best time to invest — and that time is now. If you have a hunch or some knowledge about a prospective company that could pay off in the long run; it’s useless waiting for all of the dust around the pandemic to settle. Depending on the global vaccination rates and the potential for the virus mutating, we still don’t really have an end date on the pandemic. And once it’s completely safe for investments, the market will be much more crowded; you will have missed out on a slew of opportunities!
And this is not just something we’re pulling out of thin air; between March 2020 and 2021, plenty of stocks have pretty much doubled in value. People who have decided to wait for the entire market to bounce back have definitely lost in the long run.
Tech reigns supreme
If there’s one smart investment during the pandemic — that has turned out to be tech companies. In many ways, technology is already reigning supreme; S&P 500, pretty much tech-less compared to the NASDAQ 100, has performed considerably worse during the pandemic.
And you don’t really have to be a financial genius to see that tech companies weren’t as affected by the pandemic as others might have been. For software development companies, switching to a remote work environment was pretty much seamless; guaranteeing minimal business interruption.
Plus, there are plenty of companies that have raised their profile and value with genius solutions — such as the virtual meeting software developer Zoom. While the tech industry has been as strong as ever since the dot-com bubble, we have to note that it has proven its rude health in the times of the pandemic – more so than ever before!
We hope that this guide was useful to you and that you have managed to learn something new when it comes to smart investments to make during the 2021 pandemic. Make sure you are staying safe in these times we are all going through and have a good one, guys!
