By The Biz Team (Siam)
The COVID pandemic has caused an upheaval in every single business. The tourism industry has collapsed, airlines are on the verge of bankruptcy, the world of entertainment and sports has been obliterated, thousands of restaurants have closed, and movie theaters have shut down. It is estimated that almost 40-60% of the businesses that closed as a result of the COVID pandemic, may never reopen again. When life will return to normal is anyone’s guess. Millions of people remain out of work, some permanently laid off. In view of these difficult times, is it safe to invest in stocks? Here are some personal pieces of advice to people who want to invest in stocks:
The very first thing people should remember is that at the start of the COVID pandemic, Wall Street collapsed and the stock market followed. Millions of people who had invested in the stock market became poor overnight, and billionaires dropped to millionaires. The stock market is very unpredictable, even at the best of times. The people who work in the financial industry typically have a worse reputation than a used car salesperson. So the adage, "Buyer Beware" should be remembered.
Investing in the stock market is not for the majority of people. First, you must have money that you are prepared to lose. If you can’t fathom that, then the stock market is not for you. There are countless hard-luck stories on cyberspace of people who have lost their life savings by investing in the stock market. Sure, some people do get rich, but the majority of people lose money. The current financial market is not one of opportunity, but patience. Investing in short-term stock is like bungee jumping, with the rope only loosely tightened around your ankles. So, if you do not have spare change, consider yourself lucky as you will be spared the agony of defeat in the stock market.
In today’s economic times, the stock market may sound like an opportunity to make money, but this is a major mistake. Anyone thinking of short-term investment in the stock market is a fool. This is not the time to buy individual stocks or shares of a pharmaceutical company, with the hopes of cashing in on a cure for coronavirus. This strategy will most likely not end well for that investor. There is no question that for the next six months or even longer, the stock market will remain liable and likely to send prices down rather than up.
There is no one who can predict if the stock market has bottomed out and thus, if you invest today, your investments may be worthless tomorrow. Remember, the stock market is full of individuals who speculate. Some experts will say that this is a great time to invest, as there are many opportunities to buy stocks at a low price. While it may be tempting to buy shares when they are priced low, the problem is that the stock market is very unpredictable and irrational. Instead of prices going up, they can go down to zero. So patience is key and greed is detrimental.
There are many unscrupulous people in the world of finance who make false promises. They will offer you interest rates of more than 8-10% on your investments. In today’s difficult economic times, if you get offered more than 2% interest, then consider it to be a Ponzi scheme or a very high-risk investment, in which you will most likely be looking for a place to sleep on the streets in the not so distant future.
Do not invest in new startups, because there is no way of knowing what will happen to them over the next few months. Hundreds of new startups close every month.
The stock market is best for people who want to make a long-term investment. Invest in proven stocks, or those that have shown stability over many years. Consider long term investment in bona fide companies that have been around for years. Find companies where you believe the management has developed a stable brand for long-term growth. In the long term, if you invest with the right companies, the share price will increase, but this is not going to happen overnight; it may take years. This may not be a seductive strategy, but it is one that has historically paid off. So, be patient and just forget the short term investment BS.
For those who are new to investment, start by improving your work 401K plan. You will also get a tax break on your contributions. If you have a lot of money lying around, diversify into different types of investments besides stocks.
Finally, it is vital that you invest with an honest financial broker. Financial experts will always twist numbers to seduce investors, but do your homework. Finding a financial expert who is honest is difficult because they all have one thing in common, they want to get rich with your money. So, talk to people and speak to your friends and family. Do your research on these people and their companies. Don't fall for the hype of fancy cars and immaculate suits. Investing money should never be an emergency, so do not rush. Take your time and do not let anyone force you to invest. The hastier you act and the more risks you take, the more likely it is you will lose everything.
Even though many new brokerage accounts have been created recently, this isn't the time for newbie investors who want to make it big overnight. The world of investing in stocks is murky and not opaque. Huge sharks lie in wait, and for those who don't manage to get away, they will likely drown. If you have little money to spare, just put it in the bank or under your pillow. For most people, investing in the stock market brings only one thing...disappointment.
Let’s heed Warren Buffet’’s advice on investment, “Be careful when others are greedy and greedy when others are fearful.” With hundreds of thousands of people already starting to sign up on new brokerage accounts, this should tell you where you stand.