How can this pandemic help you in stock market?

Our manner of life has undoubtedly changed as a result of COVID-19. Lockdowns and social alienation have had a significant negative impact on economies all across the world. While other nations are easing restrictions and getting set to revive their economies, the Philippines is still under a protracted quarantine due to increased instances.

Businesses and institutions will continue to be closed or run with minimal staff as long as Filipinos are frightened to leave the house. As a result, our stock market is still down, and there’s a potential to continue to decline. Some investors were compelled to sell their equities at a loss to raise cash to weather this storm.

It’s common knowledge among potential investors that there is never a better time to begin investing than now. Generally speaking, this is accurate, but what if the “now” is during a pandemic? Should you do something or not?

 

Stock up on investible cash

Cash is still king during a crisis. But it would be best if you didn’t lose sight of opportunities to increase your bankroll. Additionally, we’ll always need to predict how long this epidemic will endure or whether another decrease will ever occur. Because of this, before investing, figure out how much money you have available to put into it. Your money should be kept in a savings account or a money market fund so that it may be invested immediately when you decide to get in. Your money will be “parked” in this manner for future use.

Learn how COVID-19 is impacting various industries and investor sentiment

The stock market is influenced by external factors in addition to company profitability, including but not limited to weather, political atmosphere, and the general health of the populace (in our case, it is managing the impact of COVID-19). It’s critical first to understand how each of them impacts the stock market’s performance.

Organize your investment plan.

It’s time to decide how you’ll start investing now that you’ve stashed your investable assets and researched the effects of various factors on the stock market. There are generally two approaches:

First, the all-in strategy. Imagine you have PHP 50,000 available for investment. The all-in approach refers to investing all of your money at once. The advantage of this is that if the stock market rallies, you can quickly realize more significant gains without worrying about future investments (such as forgetting to invest). The disadvantage of this strategy, as opposed to the one below, is that you might sustain a more considerable paper loss if the market declines.

The cost-averaging approach is the second. With this approach, you divide each investment into PHP 5,000 or PHP 10,000 and spread it over several days or even weeks rather than investing the entire PHP 50,000 in one go. The advantage of this method is that you can profit from future market declines, but the negative is that, in the event of a sharp stock market increase, your prospective profits will be lower than with the all-in plan.

Select a fund

You can choose from various equity fund categories, such as dividend equity funds, equity index funds, and simple equity funds. Each fund has a distinct approach and goal. Before choosing one, it is best to first learn about a fund’s attributes and see whether they fit your investing style. A fund’s website contains all of its information, which may be used as a reference by both new and experienced investors. Before fully committing to stock market investing, we encourage you to conduct preliminary research.

Possibility of earning more than the returns on bank deposits

Bangko Sentral ng Pilipinas (BSP) has been lowering policy rates and reserve requirements for banks since last year’s pandemic to boost lending and consumer spending. Interest rates have been falling to historic lows, which is anticipated to continue beyond 2021. Thus, people flush with cash choose to invest in stocks rather than putting their money in banks, which only give interest rates up to 2% annually. Stocks, in contrast, may provide a greater return (compared to the typical return on the Philippine stock market has been 6.40 percent in the last ten years).

Greater availability of listed shares

One benefit of the pandemic is the development of internet stock trading due to technological advancement. This increased market participation and provided more Filipinos with income alternatives, particularly those who had lost their employment or businesses due to the pandemic. Building your wealth through stock market trading is achievable even without leaving the comfort of your home, as more stock brokerage firms have gone online. It only takes a few clicks on your keyboard or clicks on your smartphone to invest in your favorite equities.

Prepared for a comeback

2021 is still a more decisive year than 2020 for the PSEi despite inevitable setbacks, such as the ongoing rise in COVID-19 cases that forced the government to revert to more restrictive regulations in Metro Manila and neighboring provinces. The introduction of the vaccination should boost investor confidence. However, because the crisis is only temporary, it is challenging for stock market specialists to predict when the rebound will occur.

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