Eyeing investments during a global pandemic

Jerrod Ferguson, vice president at Vance Wealth, discusses strategy with a client during a recent meeting. Financial advisers tend to agree that investments should be made with long-term goals in mind, not as a reaction to what could be a temporary market situation. Courtesy SchlickArt Photography

It’s no surprise, the nation entered a recession as the coronavirus pandemic continues to impact each market in one aspect or another.

Though the economy all but shut down completely, this recession doesn’t feel like previous ones, as many markets that you’d expect to crash have remained strong.

While market volatility in the midst of the pandemic is almost guaranteed, most financial analysts agree many markets may have already made it out the other end, including the stock market. 

“This economic issue, this recession that we’re going through now is different than the last one at the core, and so to confuse the two is a mistake,” local financial adviser Erick Arndt said. “Regardless, there could be some opportunities that pop up, because every time the economy shifts, there is opportunity.”

As with any big financial decision, when trying to time the market and decide if now is the right time to make some investments, there are numerous pros and cons to consider.

Trying to predict market moves

“You can’t time the market, you really can’t,” Patti Handy, a financial adviser at Vance Wealth, said. “Warren Buffett and some of the top financial strategists of the world can’t time the market. … There’s no crystal ball, so the reality is that we just don’t time the market — we don’t try to.”

Jerrod Ferguson, vice president at Vance Wealth, agreed, adding that he considers it the “million-dollar question.”

“When you start getting into, ‘Is (this) the top of the market?’ I have no idea,” Ferguson said, adding that he doesn’t suggest waiting for the market to crash. “That gets you in a dangerous position where you’re just sitting on the sideline.” 

Instead, think about it in the long term

“If you can afford it and it’s more of a longer-term (investment), then the timing of it shouldn’t really matter,” Ferguson said. “It’s always a good time to invest if you have the time on your side.”

The amount of risk you’re taking in investing is all relative to how much time you’ve got, according to Ferguson. 

“If you have time on your hands, you can take more risk,” he added. “The higher the risk, the higher the return.”

Handy agreed, adding she believes any investment in the stock market should be considered a long-term investment.

“You do not ever want to put your money in the stock market if you need the money in the next three to four years,” she added. “We can give you a pretty high probability that the market will be higher in 10 years, but when you’re talking shorter-term, there’s so much uncertainty. We see what’s happening now with this pandemic, politics, war. These things that can happen very unexpectedly at any point in time, so we can’t predict it.”

If you’re planning on making a large purchase in the next few years, taking that money to make investments isn’t necessarily a good idea, both Ferguson and Handy agreed.

“If you’re talking about investing your home deposit that you’re maybe going to want to buy a home with in the next year or two, then I would maybe say take a step back and make sure that it’s going to be worth it,” Ferguson added, “because now all of a sudden, you’re putting money at risk when it may not be worth it.” 

Be prepared to ‘ride the waves’

“The idea is that money is money that you’re not going to touch for a very long time because it’ll ride the waves,” Handy said. “You will see volatility, because there’ll be several downs in the market and several ups in the next 15 years.”

Ferguson gave the example of those who purchased a home in 2007, right before the housing market crashed during the Great Recession.

“I think real estate has always proved to be a good investment historically,” Ferguson said. “Obviously, if you bought in 2007, you probably bought it at the market peak, and it’s taken you a long time to get back to even on your investment, but it really shouldn’t matter if it’s not a short-term house flip for you.” 

Handy suggests those making investments be prepared for the risk. 

“If you’re doing your own investing, you’ve got to take your risk tolerance into consideration,” she said. “If you can’t sleep at night knowing that your money might go down, you have a low tolerance for risk.

“You don’t want to have your head in the sand, you actually want to know what’s going on, but you don’t want to panic,” Handy added. “There’s so much behavioral emotion behind money that people make the worst mistakes when they’re in a place of fear.”

But really, it’s up to you and your own financial goals

“I think time horizon is a big thing and clarity about the future,” Ferguson said. 

Someone’s time horizon is specific to their financial situation and the clarity they have on their financial future, such as the stability of their job and their partner’s. 

Handy agreed, adding that it all comes down to your own timeline.

“It’s a very personal thing based on your time horizon and what you have going on in your life,” she said. “If you’re going to buy a house or get married or if you are looking to retire or whatever the case is, you definitely have to have that long-term vision when you’re looking at the stock market.”

Arndt, Ferguson and Handy all agree: Now is the time when coming up with a financial plan is key. And all four financial analysts suggest speaking to an expert when making a plan. 

“Be careful who you’re talking to,” Handy added. “A lot of people will reach out to family or friends and get their opinion on things, but the only person you really should be talking to about investment choices and what to do with your hard-earned money would be a professional.” 

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