The stock market has experienced outstanding volatility in recent months, and this is likely to continue as the country officially enters into a recession and COVID-19 cases are spiking across the country.
In the midst of this turbulence in the market, only 6% of investors make a smart move. According to a recent study conducted by the principal, the percentage of people planning to increase the amount they invest while the market is going through this uneven period.
Why invest more now is a smart move
While the coronavirus sent the market crashing in March, April and May, shares were seen. Stocks were on a bumpy ride in June, rising at the beginning of the month but took a dive as coronavirus cases began to spike across the country and states began rolling back their plans to reopen.
While positive job numbers in June have sent the market higher in early July, the fact remains that the country is in a recession and public health experts warn that things could get much worse. If that happens, another market crash may be just around the corner.
With that fear in mind, you may be tempted to sit on the page because you do not want losses. However, the reality is that recession and market corrections generally provide unique buying opportunities that give you the chance to pick up shares at bargain prices so you can maximize your return. In fact, one of the world’s best investors, Warren Buffett, has recommended being “scared when others are greedy and greedy when others are scared.”
Of course, you may be tempted to sit on the side not because you are afraid to invest in turbulent times, but because you hope to be able to buy in the rock bottom after a new crash actually occurs. Unfortunately, no one can predict when it will happen, and if you wait for it, you may miss good buying opportunities that exist right now.
However, investing more is not right for everyone
Investing during a recession can help you maximize your return, but that is not the right approach for everyone. Of course, some people have no extra money to increase their investments right now, given their current financial situation.
Also, you should not start putting your money on the market if:
- You have no sound investment strategy. You should only invest in things you understand and make sure you are confident in your choices so that you are not tempted to react and panic to sell if things start to look rough.
- You have no emergency fund. During a recession, it is more important than ever to save money in emergencies, so that you do not have to borrow and pay interest or loot your investment accounts, possibly selling at a loss to cover your short-term needs.
- You do not want to commit to leaving your money invested for several years: Investing in a recession can maximize long-term profits, but it can also lead to short-term losses. If you can’t leave your money invested for at least a few years to wait for any downturn, don’t invest.
Consider putting more money on the market if you can
If you have met your basic needs and are prepared to invest wisely and wait for any downturns, you can often earn good returns by investing in a volatile market.
And although there is always a risk associated with any investment, long-term investors who have made the smart choice to pick up extra shares during a recession will usually be happy to do so in the future.