The coronavirus has had a natural impact on the global economy by reducing business activity, causing some industries to reduce their output and many small businesses to temporarily or permanently close. The broader impact of the virus on global finances, however, is evident in changing market expectations related to stability as the corona era heads to a full-blown recession on a global scale. Strategies for how you should invest in this strange time have changed as a result.
This is a guide to the investment opportunities that still exist during the coronavirus, which you should take advantage of, and also which financial mistakes you should avoid because of changing standards to global investment expectations and market opportunities.
An opportunity for improvement
Investment is not the only financial opportunity available to you in the corona era. While the economy is in a lull, your business should take this opportunity to upgrade and refine its marketing, research, operational, or communication procedures. This is an “investment” in your business in the sense that it will reap a return when the world begins turning again. This may be a bad time for moving products but it’s a perfect time for reassessing how to do it better.
Take a retail chain as an example. A quality point of sale or POS system may not yet be fully integrated into your business to its fullest potential – now is the perfect time to adapt to a new system so you can hit the ground running when you reopen. A POS is more than a digital cash register: it can help you track orders, pay your suppliers, and manage the inventories of your different locations from one electronic hub.
You may not be using your warehouse space efficiently, or you may find that you overstock on certain products but haven’t had time to reassess your inventory management systems to change. Now is the time to make those changes to make your system of shipping and delivery more efficient and more profitable as a result.
There are other kinds of improvements that your business can make. Even a one-person operation like a blogger can use this time at home to monetize their site, form new business contacts, and refine their writing voice. Other businesses can refine their employee training procedures as well as their electronic systems – your business has to make a shift with the times and this is the perfect opportunity.
As a restaurant, you could introduce take-out meals to your business model. As a video game distributor, you could refine your system for digital sales. As a law firm, you could refine your approach to remote workers and put more of your paperwork and procedures online. Most businesses have room to improve and adapt to the corona era. Don’t get left behind.
How to invest during the pandemic
Many states, like the government of Qatar, are helping small businesses stay in operation with small investment packages. As an individual with capital, however, you are part of the same solution to keep the economy going – your well-placed investments could keep business working even in troubled times. Your mistakes could also cost you if you’re not willing to adapt to new investment standards. You have to know the opportunities from the traps to choose correctly.
While it would be convenient for economies to work perfectly on paper based on an objective model, “behavioral economics” is a term used to describe the emotional factors that influence the financial decisions that people make, particularly under emotional stress. The coronavirus is an instance where behavioral economics has a huge sway on how people will spend their money.
The biggest mistake that an investor can make is to act hastily. Despite the urgency that the coronavirus has in the news related to health, in terms of economics, it is not such an immediate threat for investors who are simply trying to save for their retirement.
If you have a safety net of safe investments, such as an investment in bonds, then an economic downturn would only seriously affect your ability to retire or to maintain your clean investment portfolio after five or more years of recession. Large companies will likely regain their footing before that time and your market investments will pay off again.
The most experienced investors insist that the biggest problem a small investor can make is to try and bail on the stock market in an economic recession in the hopes of re-investing when things look good again. Without a superhuman ability to measure the market’s progress, you won’t be able to make either of these moves at the right time.
Unless you need money urgently, letting your investments stay where they are as the market simmers down will be a far more profitable move for you than trying to abandon the ship and boarding again when the seas look calmer. People who do this usually do so in recessions, including those related to 9/11, or the banking and housing crises. They always lose money.
The Takeaway
The market is more volatile right now as the coronavirus pandemic changes people’s expectations for investments, making them feel the need to pull their investments or downsize their portfolio to match that of the nation. This may not be the right option.
Instead, savvy investors are using this time as an opportunity to improve their systems, adapt their businesses to new remote paradigms, and refine their employee training practices. Investors are looking at small businesses to support and leaving their stocks in large companies where they are, since most if not all of them will remain after the virus has blown over.
In many cases, hasty financial decisions cost investors more money during recessions than the recessions do. Since it’s nearly impossible to exit and re-enter the market at the times required to ensure that the move will make you money rather than lose it, you should spend this time examining your business model and refining your portfolio rather than trying to make any significant changes to your practices for the sake of a disaster that will be over soon.
