The COVID-19 outbreak has definitely done a number on the U.S. economy, causing many people to lose their jobs and forcing over 100,000 small businesses to close their doors permanently. At this point, we're stuck in a recession that's likely to be with us for the remainder of 2020, and possibly well into 2021. It's for these reasons that a lot of people are rethinking their spending and trying to find ways to conserve cash.
But surprisingly, a large number of Americans are continuing to invest despite the shaky state of the economy. In fact, 55% of people have bought stocks since the pandemic started, according to a recent survey by Personal Capital, while 28% have purchased more stock than they usually would during normal times.
If you've yet to buy stock in the course of the COVID-19 outbreak, here are a couple of reasons to consider adding some to your portfolio in the course of the next few months.
1. You might snag some great deals
Back in March, stock values plummeted when it became clear that COVID-19 would not only be a major public health threat, but an economic one as well. Since then, stocks have largely recovered, but there's a good chance they'll fall again during the latter part of the year. And that gives you an opportunity to load up on some quality stocks without spending as much as you'd normally have to.
2. You need strong returns to meet your long-term financial goals
A lot of people are leaving much of their savings in cash right now, and while that's a smart thing to do for your emergency fund, the money you have beyond that point should really be invested. The reason? With a savings account, these days, you'll earn 1% interest a year if you're lucky. The stock market, however, has historically delivered more like a 9% average yearly return, so if you buy stocks now, you'll be setting yourself up to grow more wealth over time.
What stocks should you buy during the COVID-19 outbreak?
If you're going to add stocks to your portfolio in the coming months, make sure they align with your investing strategy, goals, and risk tolerance. And also, make sure they lend to a fair degree of diversity within your portfolio. If you already own a lot of bank stocks, for example, you may want to focus elsewhere in the next few months.
Furthermore, tempting as it may be to throw your money into companies that are working on a COVID-19 vaccine, make sure you do your research before buying those stocks. There's a lot of speculation on the vaccine development front, and you shouldn't invest in a company unless you have a solid understanding of its business model, cash flow, and competitive edge (that's a good rule of thumb in general, not just during the current pandemic).
Finally, if you're relatively new to investing and don't have time to do a lot of research, index funds could be a good bet. Index funds track existing indexes like the S&P 500 so that when the broader market goes up, so does your portfolio. Index funds also offer instant diversification, which is a healthy thing to have in your portfolio at a time like this.
Of course, if you don't have a lot of cash reserves, then now may not be the ideal time to acquire more stocks. But if you have a healthy emergency fund, it pays to join the ranks of the 55% of people who are adding to their portfolios despite the upheaval the pandemic has caused