If you are looking for ways to save for retirement, then you have probably targeted the stock market as one of the ways to accomplish this goal. At the same time, the COVID-19 pandemic has sent the markets spinning. If they appear to be more volatile than ever before, then this is because they are. The ups and downs right now are a far cry from how the markets look during more stable times. Therefore, you might be wondering how to can possibly invest in the stock market during the pandemic.
First, it is important to note that the mechanics of investing in the stock market have not changed. For example, the NASDAQ trading hours are still the same, there is just more volatility to the market than there usually is. This could leave you thinking that there is a possibility that you could lose everything if you put it in the stock market now. In reality, it depends on how long your investment horizon is and when you plan on retiring.
There is a way that you can take advantage of this volatility. This involves a technique known as dollar-cost averaging. In dollar-cost averaging, you invest your money in the market in small amounts and at regular intervals. If the market is high when you put your money in, then you buy fewer shares. If the market is low when you put your money in, then you buy more shares. As a result, you buy more shares when the market is down and fewer shares when the market is high. Over time, the average price at which you purchased your shares is going to be low. This is what you want. You want to buy low and sell high. This is why dollar-cost averaging is a solid investment strategy.
Of course, there is always a question regarding what you should buy. If you buy single stocks, then you magnify your risk. There is always a chance that a single company might end up going bankrupt. This is why a lot of people like to buy low-cost index funds. This is a great way to achieve instant diversification, reducing the risk of buying a single stock while still obtaining steady returns. There are many people who use dollar-cost averaging with index funds to set themselves up for retirement.
Even though the COVID-19 pandemic has sent the markets for a loop, the principles behind investing in the stock market are still the same. As a result, dollar-cost averaging can still be a solid strategy that helps people make their retirement dreams come true. Everyone just has to have a lot of discipline and follow their strategies. As long as they follow proven strategies, everyone has a chance of reaching their retirement goals even though the markets are volatile right now.
Story by Jacob Maslow
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