Let’s start with, why do we invest? To build wealth, earn passive income, appreciate in value, stay ahead of inflation, for retirement and to meet other financial goals.
This a period of uncertainty; does it mean we shouldn’t invest? NO. Are you goals going to be on standstill? No. We can still invest at a time like this. However, certain things should be considered.
How solid is your emergency fund?- Your emergency funds should consist at least three to six months of your basic expenses. However, you may want to increase it to nine to twelve months. Basically, your emergency fund should act a safety net against unexpected financial dilemmas like the ongoing pandemic.
Next to this is- How stable is your cash flow? We know this is an uncertain period, therefore major cashflow of an individual may be disrupted. However, before investing, especially long term, do ensure that your cash flows are stable for over the next 12 months otherwise, try creating other streams of income.
What is your time horizon? Are you investing short-time or long-term. This should determine your choice of investment options.
What is your investment goal? Why are you investing. You should have a clarity of this before you start the journey of investing.
Finally, what is your risk appetite- This represents the degree to which you can afford to lose your money. You should consider your investment goal when setting your risk appetite. If you can’t afford to lose your money, keep it safe. However, the higher the risks, the higher the returns. Weigh your options carefully.
While these times are uncertain, this is also a period where people are investing in stocks, because they are cheaper at the moment. If you would be investing in stocks or anything, ensure that the investment is registered and you know how it works; it is not a scam or trap for blind investors.
This can also be helpful for investing at this time:
If you are investing short time, the money market is ideal for you. The rates may be low but this is definitely better than your money lying in your bank account.
If you are investing long time, you my want to try out the stock market (this is one good time to buy stocks when it is cheaper). The market may not be good at this time but will definitely shoot up. When buying stocks, ensure that they are from companies that you can guarantee their long-term existence.
If your investment goals are denominated in foreign currency, you should most likely consider saving or investing in stable foreign currencies.
We believe in you!
To your financial independence and freedom