Given the current situation with the COVID-19 pandemic, investors are re-evaluating their participation in the economy now that they’ve become more volatile than they have been in a long time. Many short-term investors have been burned by the drastic shifts that many industries suffered following the official announcement that COVID-19 has gone global and is now a pandemic.
For some, investing is a marathon, not a sprint, and there is always a second wind. Where many investors see a volatile market with a tentative potential for future growth, others see a surefire opportunity to make profit in the long run. It’s time for the long-term investors to introduce themselves.
Any great upheaval in modern history has always presented a fantastic opportunity for the more patient and calculating investors among us to capitalize on the emergent or transformed industries following these periods of unrest, and the COVID crisis is certainly no exception.
Here we’ll speculate which industries are the ripest for profitable long-term investments in a post-COVID world and finish off with some tips for those new to the game.
Before we do that, it should be noted that investors of all stripes will need to understand the strategies that the experts are recommending for a post-COVID world. We feel this is important for the long-term investors out there too, since it’s all about managing enthusiasm and expectations whilst still returning to the market to promote growth, so enjoy this piece with Javad Marandi.
Long-Term Investment Opportunities.
As mentioned, some of the most attractive post-crisis investment opportunities are those that have come about as a result of the unrest. If there’s one winner to be crowned in this regard, it’s collaboration technology. Collaboration tech is used to refer to the umbrella of technology that we use to interface with one another, e.g. apps like Zoom that have existed for a long time but only recently rocketed to the forefront of the cultural consciousness.
Working From Home.
Whilst connected to collaboration tech, the work from home mandate that many companies issued is a very exciting prospect for investors of all stripes. The work from home ethos that has developed has been profitable for both the companies and their workers, so everyone is on board. So far, we can expect that collaboration tech, pro software, computer hardware, and even furniture and stationery could all see a significant increase if working from home becomes a semi-permanent occurrence for many businesses.
This also opens up an incredibly exciting prospect, which is that as more people work from home, there is less of a necessity to be based in cities and other urban centers. This should stimulate the economies of rural regions as people realize they can do their job and enjoy a peaceful country existence, potentially introducing real estate investment opportunities to the equation, as well as all of the other investment opportunities that come with rural-to-urban development.
Long-Term Investment Tips.
Know Your Winners and Losers.
We all know how long-term investment works but it’s something that very few people master. It takes a tremendous amount of discipline, more than short-term investors, since they would usually bail after making profit on a winner.
As a long-term investor, if you’re “riding a winner” then you’ll feel the desire to quit whilst you’re ahead. This is usually because of rules that you first hear about trading which, whilst they may be handy for short-term trading, are arbitrary when long-term trading.
On the other hand, there are scenarios where you should ditch your long-term investment, usually after a stock has seen some decline and shows no signs or prospects of a rebound. Many investors are well-acquainted with that sinking feeling when you start to see your stock trending downwards, it has a profound psychological effect on you as your mind signals a failure on your part.
The solution to both of these is simpler than you may think. It boils down to judging the companies and their stock performance on its merits. Know thyself and be as objective as you can, judging your stocks on their performance and being wary of the emotional and psychological impacts of trading, so that you can rise above them.
Also, always do your own research, no matter how credible that stock tip seems. From there, it’s your call whether to stick with or bail out of a stock. Decide on a price that justifies future potential and cut the cord when you think it’s right.
This one may come across as self-evident, but you’d be surprised at how many long-term investors come from short-term trading and believe they can game the system by gluing their eye to every investment’s micromovements. Despite trying to extend their portfolio with a long-term investment or two, these individuals unwittingly treat them like short-term investments.
Short-term volatility not only exacerbates your anxiety as a trader, nudging you further towards buying late or selling prematurely, but it’s also not useful for long-term investment. By placing some of your hard-earned cash into a long-term investment, you’re buying into a narrative that, in a few months to a few years’ time, the company will have seen enough success to throw a handsome profit your way.
To possibly have a chance of predicting such success, you need to be focusing on a lot more than your precious candlesticks. It requires a finger on the pulse of what’s happening, both in that specific industry and the world at large, so you can identify a cultural, technological, or political trajectory and invest in accordance with it, instead of swimming against the tide.
Put Potential Over The Past.
This isn’t to say that past data cannot indicate what’s in store for a stock’s future, but you should have the outlook that by investing in a company long-term, you’re valuing their potential over their past performance. That’s the difficult part, because if making informed decisions on events that haven’t happened yet was easy then everybody would be doing it.
Instead focus on a business’ potential for success on the stock market and put your money down where you see the most certain growth opportunities. You don’t want to have thumbed your nose at an otherwise primed investment opportunity for a shaky period in their past, only to later find out that they’re the next big household name.
Speaking of, this leads into another important reminder, that brands without great brand awareness are just as valid investments as their larger counterparts. Don’t fill your portfolio with unrecognizable names, sure, but small-cap stocks have historically shown a greater potential for returns than large-cap stocks, so they’re nothing to turn away from.
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