This March, the markets started to tank because of the COVID-19 pandemic. Like many others, I saw what was happening and rushed to review my investment accounts.
My action wasn't prompted by fear, though. As I logged into my accounts, I wasn't nervously biting my nails to see how much money I'd lost.
In addition to being both a physical and mental healthcare crisis, COVID-19 quickly became an economic crisis as well. However, I was fortunate enough to be in a position where my income didn't drop. If anything, I had more disposable income because I was sheltering in place and was only spending money on essential supplies. My weekly social activities like drinks, dinner out, and in-theater movies were now non-existent. I could either spend the saved money on different discretionary items or do something that would greatly improve my financial future.
I knew this was a unique opportunity, so I decided to put the extra money to work in the stock market. I structured my investment plan like a pyramid, with the simplest and most predictable strategy on the bottom. Next came the strategies that were more risky but could potentially provide a lot of growth. Finally, I topped off the pyramid with my most speculative of investments.
Pyramid base: Index ETFs
The first action I took was to calculate all of the money that I was saving each month. I already had 6 months of money set aside in an emergency fund, but with unemployment numbers hitting all-time highs, I thought it would be prudent to grow my emergency fund. I took 25% of the money I was saving monthly and added it to my emergency fund.
With the remaining 75% of the money I was saving, I focused on exchange traded fund (ETF) investing. I started to purchase shares of SPDR S&P 500 ETF (NYSEMKT:SPY) monthly. I could've tried to time the bottom of this crash, sure. But by putting some money into the fund monthly, I'd avoid having money sitting on the sidelines doing nothing.
The middle of the pyramid: Sector funds
The next approach I took was more specific to this pandemic. I wanted to invest in industries I thought would perform well during this current economic environment.
But first, I needed to make money available. I accomplished this using a rebalancing approach, taking some profits from my current investments that had done well over the last year, and investing into 3 different sector ETFs that appealed to me.
First of all, I invested in a consumer staples ETF, the IShares Dow Jones US Consumer Goods ETF (NYSEMKT:IYK). On the whole, many people's purchases were reduced to just essentials -- so while other retail industries would struggle, supplies that people needed on a daily basis would not.
I also invested in a healthcare ETF, the IShares Dow Jones US Healthcare ETF (NYSEMKT:IYH). As different companies raced to find treatments and vaccines for this virus that had completely taken over everyone's lives, the healthcare sector seemed like a good pick.
Finally, I selected a technology ETF, the IShares Dow Jones US Technology ETF (NYSEMKT:IYW) because everyone in the country (if not the world!) now found themselves at home. It was clear to me that people would need technology to power them through the school day, workday, and for entertainment.
I took a portion of my investment profits and equally divided them between these sectors.
The top of the pyramid
Finally, it was time for me to make my most targeted investments into individual stocks to hold for the long term. These investments were the most speculative. Although individual stocks have the greatest potential for growth, they're also the riskiest part of my pyramid.
Within the 3 sectors I identified for my ETF investing, I also found some companies performing well during the pandemic that were worth a direct investment. I invested the remainder of my rebalancing profits into these companies.
Before actually buying any stocks, though, I took some time to learn about each company's general lines of business and financial health. Was its stock fairly priced? Did the company have any debt? I also wanted to make sure that these companies had potential to succeed outside of any COVID-19 business opportunities. This would make it easier to hold these companies for the long term.
After some careful research, I chose to put the majority of the money I allocated for individual stocks into healthcare stocks. Of course, Gilead Sciences (NASDAQ:GILD) appealed to me because of its drug remdesivir, which has been the first treatment to show promise with fighting the novel coronavirus. In addition to remdesivir, Gilead has a great dividend and steady revenue from its HIV and hepatitis C treatments.
I also was drawn to Abbott Labs (NYSE:ABT) which was the first to produce a fast-results COVID-19 test. Before the COVID-19 pandemic became the primary focus of the healthcare industry, Abbott was a strong company with solid growth in both its pharmaceuticals and medical devices divisions.
While some investors interpret falling markets as a sign of doom and gloom, I see it as a chance to buy valuable companies at a discount. The COVID-19 pandemic has brought about many opportunities, but as we learn about the virus, those opportunities frequently will change.
This constant change means it's never too late to find promising investments. If you're someone who feels as if you've missed your chance, you have not! As long as there are new developments, it's a good time for anyone in a financial position to do so to start investing. And as long as my economic situation remains stable, I will continue to look for great investments.