Should you Invest during the pandemic?

The pandemic has forced people to avoid going out more often, travelling less and working remotely. Given that, most Singaporeans feel they have more flexibility and free time to do the things they want. It is undoubtedly that COVID-19 had a massive impact in terms of finances, making people feel more vulnerable, giving them the urge to be more financially resilient.

Young adults are heavily influenced by this, especially that there is so much news on social media about different ways and mediums to invest. Recent survey courtesy of the Strait Times shows that 80% of young adults from Singapore are currently investing and 88% plan to do. After all, everyone wants to earn money in the comfort of their homes.

However, people sometimes get so blinded to earn and forget the risks of investing money. The pandemic is truly a tough time for the majority and the biggest dilemma to ask ourselves is should we save money or invest it?

Everyone should take preventive measures in avoiding risk before entering a market. Whether it’s equity, cryptocurrency, bonds, mutual funds, REITs or anything else, there is always risk and reward. With the rise of technology, investing is easier than ever, people can earn money in a flash but also losing money can be as fast.

Before deciding whether to enter the market, it is crucial to assess ourselves if we are in the position to invest or not. Here are some points to consider before making a decision.

1. Availability of cash

A prerequisite of Investing is cash, and the question to ask is how much cash do you have? It’s important to not be hasty and impulsive in investing, you don’t need a lot of cash to invest, you can start with little cash to avoid the risk of losing big sums of money.

2. Emergency fund

A rule of thumb in investments is to never use the money that’s meant for emergencies. Only use money that you can spare, an amount you don’t need any time. Make wiser decisions and calculate the essentials you need for at least 6-12 months as your emergency fund. With the current economic crisis, think objectively about your job and source of income.

3. How much do you need the money?

If you plan on investing, only use the extra money you have. Because in circumstances when you urgently need the money you invested, this can lead to losses when you pull out your investments depending on the status of the market. Also, consider depending on the type of market you enter, your money can be locked in as well.

4. Risk tolerance

There is always risk in investing and one should have sufficient tolerance before making bold choices. Understand your risk appetite, the amount and type of risk that you are prepared to pursue, retain or take. If you cannot tolerate risk and emotions start to take over you, this might result in a huge number of losses.

5. Investment plan and objectives

Some people invest without having a plan or purpose, having a plan and knowing your objectives allows you to obtain the right investment instruments that are best suited for you. Study, do your own due diligence and understand the market you wish to enter before taking any step further.

Investing is a good plan to exponentially grow your money, but it is key to ensure that you are aware of the benefits and drawbacks of investments.