Maybe you have been thinking about getting involved with an investment, but the current economic downturn has you rethinking your plan. The global economy has been hit hard by the COVID-19 pandemic and that leaves questions for investors.
Recessions are not solely about poor economic growth. There is also job loss, fewer jobs available, and further government relief. What does that mean if you plan on investing? It means that you can still invest, but only if you have the following criteria met.
Plenty of Savings
Whenever you undertake an investment, make sure that you have emergency savings to cover you. That means enough money in the bank to cover three to six months of living expenses. Whenever you get into a major investment, have the funds available to fall back on when things potentially turn bad.
Some have the misconception that their investment will explode in value overnight and they will be able to take their money out sooner rather than later. On the conservative side, don’t plan on touching your portfolio for a minimum of seven years.
If you are investing during a downturn, it can feel scary. You may want to pull your funds out sooner rather than later. But portfolios typically experience frequent rises and falls, with the goal of steady annual growth.
Don’t Check on Your Investment Often
Another major mistake that amateur investors make is that they obsessively check on their portfolio. In a down market in particular, those declines can seem scary. But again, investing is about long-term growth.
The market will experience rises and declines on a regular basis. Tracking those movements on a daily basis is a quick way to stress yourself out. Try not to check on your investments more than once per week, though even that is too much.
Yes, you want to get out from underneath a losing investment if you can, but an investment that loses value in one day is not that. Give it time to see whether or not it is a losing endeavor or one that experiences slow growth.