There is no doubt that the year of 2020 is a whirlwind for everyone on the earth. We have experienced the unprecedented business shutdowns, social distancing as well as government printing enormous money. You might not experience any inflation signs yet, but you may already hear about the story of people rushing into Robinhood to pick up cheap stocks.
The truth is that if you don’t earn more, you will lose due to the forceable inflation. But before you jump into any market, I just want to analyze the pros and cons of the possible investing opportunities.
In the beginning of the Covid 19 pandemic, everyone was thinking that houses would be cheap because people can not afford paying mortgages any more. It might be true to some extent, but we heard more news about people in big cities like Toronto and New York are fighting to buy new houses due to the low interest rates as well as the growing demand for stable living space.
It is a common opinion that real estate is a natural medium for countering inflation, which is true in most sense, but still you need to carefully evaluate your personal finance before making any decision in such a volatile time. It might be easy to buy a new house with a low mortgage rate, but you will need to rent it out to earn your money back. While middle class people have the opportunity to work from home and earn consistent income, people with renting needs might not get lucky. So there is a possibility that the rental market will go down in a while. In the meantime, you will need to pay the maintenance fees while it is vacant. Let’s take Toronto for example, it not only has harsh weather in winter, but also storms and tornadoes in summer. You may end up paying more in appliance repair or locksmith services due to the vacancy of the house.
Opening an account with Robinhood is not difficult, but you need solid knowledge, experience and determination to make consistent profits. Even Warren Buffet lost money by cutting off his holdings in airline stocks. So you should carefully evaluate your purchase decision and ultimate strategy. It is true that there are unlimited opportunities to pick cheap stocks during the pandemic, but what’s next? Will you be a constant swing trader or even day trader? Would you plan to be a value investor? Do you want to buy dividend stocks or momentum stocks?
Just ask questions before you hit any buy button.
Gold is another popular method for resisting inflation as well, but it is relatively difficult to buy and store compared with stocks. You may need to rent a safe box from a bank to store physical gold or you can buy a gold ETF, which goes back to the stock market.
We can not ignore bitcoin when we talk about finance nowadays. It even earned the name of “Digital Gold” due to the fact that it maintained a high value for a long time. It might be the choice for risk takers as it has the possibility to go up even more due to the money printing situation, but please bear in mind that the Bicoin market is a relatively new market which lacks official regulation and proven rules. It can be an extreme version of the stock market, so you’d better not jump in unless you are prepared.
The most important thing about pandemic investing is to think more carefully about the risks as every opportunity will be exaggerated. We hope you can make informed investment decisions while staying safe.