Should stock type matter in uncertain times such as Covid19?
The US stock market has had and is still having a scare thanks to the Covid19 pandemic. Mid-February was a relatively good time for most stocks but mid-march saw many falling from grace to grass. What the stock prices will be like by the end of the year is anyone’s guess.
Should uncertainties such as Covid19 scare you into shying away from stocks? If you decide to invest in stocks, will any do? Taking time to research before adding given stocks in your portfolio will limit the amount of headache and heartache you have to endure during such times.
How do you find the right stocks? This article will give you a few pointers.
Supply and demand for given equity play a good role in how the stocks will fair. If there is a good balance between the two then stock prices tend to rise or maintain a steady position. But, if there are limited demand and plenty of supply then you can generally expect a fall in stock prices.
Let’s take two distinct examples when it comes to considering the product. Let us consider necessities versus discretionary products. When the virus made a huge impact earlier in the year, most people stocked up staple items such as toothpaste and toilet paper. Discretionary things such as fancy homes, restaurants, shoes, and clothes took a back burner for most.
Does this mean that if you invested in staple stocks companies, you got a windfall? The answer surprisingly is NO. Discretionary items surprisingly surpassed staples by at least 6% (Consumer Discretionary Select SPDR EFT) while the staples went down by at least 3%.
How about the real estate market versus the financial market? With most people being locked down in their homes and having to adjust to working from home and majorly making used of internet-based financials such as Paypal to complete transactions, the financial companies have had to endure some falls.
With the two examples above, it is safe to say that investing in stocks may not necessarily be according to current market trends but rather what the individual investors are interested in. It may not necessarily be what the future holds but what today looks like.
As such, when making a stock investment, you should stop and ask yourself WHY you are looking to make said investment. Is it because of market trends? Are you considering how the company has been performing over a given period? Or are you looking to invest simply because your broker advised you to do so?
No matter your reasons, it pays to do your research and not plunge into investing for the sake of investing. It also pays not to place all your eggs in one basket. It is ideal to have a versatile stock portfolio. That way, if uncertainties occur such as the current pandemic, even if some of your socks may take a hit, at least the rest will be working to make up for the hit.