The coronavirus has completely changed the financial market—well at least for the rest of the year. Most financial advisors will tell you that the downturn will go up again. It is the way of the stock market and today the returns don't look all that great.
It is the end of the first financial quarter of the year. The news is not good because the stock market and the housing market are down. We know people are going to have a hard time making ends meet. So what do you do? The action you take will depend on what you want your money to do for you in the next year, two years, ten years or even twenty-five years.
It is this that is going to make a difference in the way you see the coronavirus issue and the effect it has on the economy. What should you do? We can’t really make the decision for you. But if in doubt, here is a quick tip on how we believe everyone should think of active stocks.
In the stock market, when we refer to the short-term, we mean at least two to five years. So if you want to think short term, think two years. After that, if you have to take it out, do it. At that time, you want to think of taking a little risk so you want to invest in money market funds and very large corporations. Keep in mind, this is a very low risk and a very low return portfolio, one that may just keep slightly ahead of inflation.
If you are in the market for the long haul, we've got to say we rarely see ten years go by without a very positive return. Sure, there may be a bad year or two thrown in there somewhere, but if you wait it out, and if you don’t need the cash for a while, you can expect a return of something like 40% to 50%. If you are thinking more along the lines of twenty-five years, then you want to invest more aggressively. Because of this longer outlook and more aggressive investing, it could feasible give you returns of about 70%.
Of course, this doesn’t mean you shouldn’t play it safe. On the contrary, the biggest tip we can give you is to mix stock with bonds. Don’t go all stocks precisely because of problems like these. People who only invest in stocks take too large a risk and are affected the most by downturns. Keep in mind that the best portfolio is not one that gives you the most dividends or even the most money, but one you can live with.
People who invest in all stocks may have seen great income a month ago, but now these stocks are down by almost 40%. Sure, every downturn has a succeeding upturn. A downturn is only temporary and it will come back, but you still have to stress about it. The only way to get rid of this immediate stress is to sell. When it comes to the financial market, you need to take the good and the bad. It will pass.
One of the primary reasons for investors not getting the success they want is that they stress over every little thing. Some people just can’t handle the stress of investing. The best advice we can give you is that you want to try and give it a little more time. There are very few investments that can give you the returns that the stock market offers. Of course, you could always save more money and place it in a safe investment like a bank.
As a new investor, you need to know this is what investing is about. It is a learned art, something you need to study, consider, and invest in for the long-term. After all, we need to save money somewhere and time has shown us that the stock market offers the most returns. It would take decades of a downturn to do any real and sustainable damage to investments.