On the bright side, many of us are lucky to get to stay home with family and still earn a steady stream of income. If you are among those lucky people, you might probably be wondering how to put it to a better purpose than spending it on random purchases.
Given that we are amidst uncertain times, it is rather prudent to keep aside some money as emergency funds. While just some savings may get us through this pandemic, it is investing that can help you pull through every uncertainty that may come your way. Fintech apps such as
allow you to start investing without the need to step out.
Is it a good idea to invest now?
The first thing that matters is how much cash you have in hand. Suppose you are cash deficient and do not have enough savings to get you through for at least the next three months, then you may want to refrain from the thought of investing.
But, if you have a steady flow of income and a stash of emergency funds kept aside for your needs, then it may be the best time for you to start investing.
Here are three reasons explaining why it is a good idea to start investing during the pandemic.
- Low economic activity: With the lockdown in full swing, most businesses may have to hit the pause button. This will bring down the economic activity of the country, driving the markets down. While it may sound like bad news, a dip in the market means a fall in prices. When you invest when the market is down, there are more chances of profitability in the future.
- More time to research: Being stuck at home may not leave you with many options to keep yourself occupied. With much less travel time, you might have more free time than before. You can take advantage of it to do a thorough analysis of the assets you wish to invest in. Better research equips you with knowledge of the market and the asset class, which assists you to make better investment decisions.
- Booming alternative investments: Alternative assets are those assets that are unaffected by uncertainties. Investing in alternative assets could help you protect your money from eroding regardless of how the money market performs. The pandemic has opened doors to many alternative avenues of investment, such as cryptocurrencies. Despite distressing times, this new asset class witnessed a 500% growth in value and is still booming.
While looking to invest during uncertain times like these, keeping the core investment strategies in mind is vital. Market volatility is unavoidable during a crisis, and we are amidst the biggest crisis of the century. So, it would be wise to use it to your advantage and make it a perfect opportunity to gauge your risk appetite. Here are a few core strategies to keep in mind before you begin investing:
Buy and hold
Sometimes the best way to approach investing is to do nothing. As an investor, you should aim to buy and hold the asset regardless of how the market performs. Unless you have a dire need, there is no point in pulling off your invested money from a bear market.
Let’s assume that you had invested in Bitcoin in January last year. Suppose you had pulled out the investment by March because of the changing economic circumstances. In that case, you would have forgone the biggest bull run in the crypto market. On the other hand, if you had done nothing and waited, you would currently have earned a profit of over 500% in your portfolio.
Investing is not rocket science, but it isn’t a joke either. You cannot just buy an asset randomly and expect it to give good returns. The investment may perform well once or twice, but if you do not understand how it works, there is a chance of high risk. So, the key to good investing is always to do your own research.
Before you jump the gun, collect as much information about the asset, its past performance, demand in the market, its intrinsic value, etc. Do a comparative analysis and choose the ones that suit your investment profile. These days there is a load of information available on the market, but not everything is accurate. You need to be diligent and filter out the correct information through the mess.
Invest a certain fixed sum of money into the assets of your choice for the long term. You need to allocate this money towards investing regardless of the market performance.
This strategy is based on
rupee cost averaging. It allows you to invest in more units when the prices are low and fewer units when the price is high. Either way, when you start dedicating a certain sum of money towards investments, its value is more likely to appreciate in the long run.
Explore alternative investments
Alternative assets generally provide a hedge against economic crisis since their performance is non-correlated to the traditional markets. Recently, cryptocurrencies have risen to be the most popular alternative asset class among Indian investors. Despite being just a decade old, the crypto market has grown exponentially and is currently
valued at nearly $2 Trillion.
The 2020 lockdown brought about a fresh boost to the crypto market in India. Since then, the most popular cryptocurrency – Bitcoin, has returned
nearly 600% returns to its investors despite uncertainties.
Many cryptocurrency exchanges such as
are simplifying crypto investing for retail investors. CoinSwitch has seen a 174X growth in user base in less than a year since its launch. You can also explore other alternative investments such as gold, real estate, artefacts etc., along with cryptocurrencies to safeguard your portfolio from market risks.
The pandemic situation has taught us that timing in the market is less important than time in the market. The best approach towards investing in uncertain times is to find a group of assets that suit your profile, add it to your portfolio and wait. For all, we know this pandemic is only a phase. Given enough time, whatever little you put aside towards investing today may add to your wealth and financial growth in the future.
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