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Home » 6 Questions To Answer Before Investing

6 Questions To Answer Before Investing

June 19, 2020 by Ankit Agarwal

In the face of the coronavirus pandemic (Covid-19), stock exchanges worldwide have fallen more than 10%. For this reason, many wonders: is it a good time to invest? Some analysts see this decline as an opportunity to buy shares at an offer price. However, other assets considered as safe havens, that is, gold or government bonds, register price increases.

Investing Questions to answer

 

So, should we invest or not? It depends. Before we must review that we are prepared to be able to invest and we must also establish an investment strategy with clear and realistic goals. Therefore, here are some basic questions to ask yourself before investing.

1. Do you have an emergency fund?

If you do not have it you should know that an emergency fund is made up of 3 to 6 months of your expenses or your monthly income. The point is that you can live during this period without affecting your lifestyle. In this way, you will be able to pay for water, rent, electricity, gas, food, tuition, transportation, even credits or loans, among others. This will allow you to face a situation where you get sick, have an accident, or get fired.

The emergency fund must be available at any time, so you can have it in investment instruments with daily availability or with a very short term.

If you do not have an emergency fund, it is best that you do not invest the money you have available right now. Although there are very attractive opportunities, it is preferable to resist and have that money available to be able to live with ease in the face of any eventuality.

2. Do you have medical insurance for hospital expenses?

Some will think that the emergency fund is enough, however, you should consider that hospitalization charges can easily exceed the amount of an emergency fund. The advantage of a major medical expenses insurance is that it can absorb up to 90% of the total cost of hospitalization, it can even cover medical exams, medicines, doctor’s visits, in others, depending on the insurance you purchase.

Also, you must remember that most insurances do not bear all costs, they ask you to pay deductible and coinsurance.

It is therefore recommended that you have an emergency fund to cover the expenses of the deductible and coinsurance.

Therefore, if you do not have an emergency fund or medical insurance, it is recommended that you avoid investing your money in high-risk instruments, with a long-term investment horizon.

According to the prediction of Dr. Zhong Nanshan, a renowned epidemiologist, the month in which the coronavirus epidemic will end will be June. The expert explained that at least until the middle of this year we will continue to see new cases of this disease and, later, we will experience a gradual decline.

So we must have sufficient and available savings, in case the situation worsens and we have a bad time.

3. Do you have an investment strategy?

Before investing, it is essential to establish a strategy. This seems very complex, but it is very simple. You just have to set a clear and realistic goal. You must establish the amount you want to save, in how long, and what are your input and output parameters. 

Thus, it will be easier to stick to the plan and you will not sell anything else just because, but because the occasion deserves it. So, if you meet all the requirements, we tell you what options you have where you can invest.

4. Should I invest in the stock market?

If you do have your emergency fund, you have medical expenses insurance, at least a strategy, and money destined especially to invest, you can give yourself this luxury. Try to find information on the sector and companies, check their financial statements. Remember, invest only in what you understand how it works.

In general, almost all the shares are on offer, from the consumer sector (such as Adidas, Coca-Cola, Pepsi), perhaps in the medium term, companies exposed to consumption by digital means will benefit more ( like Amazon or Uber), luxury companies (LVMH, Kering or Hermès), or car companies (like Ford, Nissan or Volkswagen).

Nor should we forget the relevance of the pharmaceutical sector in this health crisis. The laboratories strive to achieve treatment for the disease, which, if successful, will allow an increase in the companies’ income. 

Other options coils also include companies related to hospital treatment. 

5. Should I invest in cryptocurrencies?

In the crypto world, volatility is very high, so you need to be prepared for sharp rises and falls. They are instruments that can leave very good rewards in the short term. However, most specialists recommend investing only a part of the savings, and as we have already said, this money should not be indispensable for your daily expenses. This way, you won’t have to sell cheap or at a loss.

Before investing, we recommend doing a deep investigation. Think that the price of Bitcoin is now $ 6,800, but that in a few months it can drop to $ 3,000, that size is volatility. And while they can double in value, panic can make you lose a lot of money. 

6. And what about online loans?

This moment is critical, since, unfortunately, there are many people who will not have enough income to pay their loans, because they will be quarantined without a salary; if they own a business, their sales may have decreased; they may get sick from Covid-19 and do not have health insurance, among other situations. 

So, if you invest in online loan platforms, you should do so aware of this situation, where there may be delays or no payments. Diversify very well, investing the minimum and, preferably, in people with an “A” rating, with a good credit history, who have a permanent job and insurance for major medical expenses.

In conclusion, invest only if you have an emergency fund and major medical insurance; define an investment strategy only with the money you have left; that if you lose it, it will hurt, but it will not affect your finances. We are going through difficult times, therefore, you must be cautious with your finances. Always remember to research as much as you can before investing. Anyway, don’t rush, take your time before making a decision.

Author Bio

Jonathan is the Founder of SPV Company Mortgages. As a specialist mortgage broker with over 10 years of industry knowledge, he has helped experienced landlords and first-time investors across the country; save tax, time, and money by tracking down the best ownership structure and most competitive rates.

Contents

  • 1 1. Do you have an emergency fund?
  • 2 2. Do you have medical insurance for hospital expenses?
  • 3 3. Do you have an investment strategy?
  • 4 4. Should I invest in the stock market?
  • 5 5. Should I invest in cryptocurrencies?
  • 6 6. And what about online loans?

Filed Under: Uncategorized Tagged With: investing during covid, investing questions, questions before investing

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