How can this pandemic help you in stock market?

The COVID-19 pandemic has undoubtedly reshaped our way of life, impacting economies worldwide and causing unprecedented volatility in financial markets. Lockdowns, social distancing measures, and supply chain disruptions have affected businesses across various industries, leading to a decline in corporate earnings and investor confidence. While some nations have started lifting restrictions and reviving their economies, the Philippines continues to grapple with prolonged quarantines due to rising cases.

The uncertainty surrounding the pandemic has significantly influenced stock market performance. Many businesses are operating at reduced capacity, while others have shut down completely, leading to lower revenues and weaker financial outlooks. As a result, the local stock market has experienced a downturn, with increased volatility and potential for further declines. Investors who were unprepared for the economic slowdown were forced to liquidate their stock holdings at a loss to preserve cash and weather the crisis.

Despite the challenges, experienced investors understand that market downturns often present opportunities. Historically, stock markets have rebounded from economic crises, and long-term investors recognize that bear markets provide a chance to accumulate shares of fundamentally strong companies at discounted prices. However, investing during a pandemic requires a cautious and strategic approach. Potential investors must assess market conditions, analyze company financials, and consider industry trends before making investment decisions.

While the adage “there is never a better time to start investing than now” generally holds true, the risks associated with investing during a global health crisis should not be overlooked. Investors must determine whether they have the risk tolerance and financial stability to navigate potential losses in the short term. Careful planning, diversification, and a long-term perspective can help investors capitalize on market recovery once economic conditions stabilize.

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 of the unexpected benefits of the COVID-19 pandemic has been the acceleration of digital transformation in the financial sector, particularly in stock market investing. The rise of online stock trading platforms has made it easier than ever for Filipinos to participate in the market, removing traditional barriers to entry and providing new income opportunities for individuals affected by job losses and business closures.

Before the pandemic, investing in stocks often required physical visits to brokerage firms, filling out lengthy paperwork, and navigating complex processes. However, with the rapid advancement of technology and the shift towards digital financial services, more brokerage firms have moved their operations online. This transition has democratized access to the stock market, allowing both seasoned investors and beginners to buy and sell stocks with just a few taps on their smartphones or clicks on their computers.

The convenience of online stock trading has encouraged more Filipinos to explore investment opportunities, diversifying their income sources beyond traditional employment. The availability of mobile apps and user-friendly trading platforms has also made it possible for individuals to monitor stock performance, conduct research, and execute trades in real time, even from the comfort of their homes.

Moreover, the increased availability of listed shares means that more companies are offering stocks to the public, providing investors with a broader selection of investment options. This expansion of investment choices allows traders to build diversified portfolios, manage risks more effectively, and capitalize on potential growth sectors in the economy.

As more Filipinos recognize the potential of stock trading as a viable wealth-building tool, financial literacy and investor education have become more important than ever. With the right knowledge and strategies, individuals can make informed investment decisions, leverage market opportunities, and work toward long-term financial success.

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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