Is Now A Good Time to Invest? Reasons Why it is Right to Invest Right Now!
With the ongoing period, investing in stocks is not as risky as it was before. The market has been on an upward trend since last year and this will continue for some more months so that you can expect better returns from your investments. So if you are planning to buy any stock or mutual fund, then do that right away!
The best thing about buying shares of companies during these times is that they have become cheaper than ever. This means that even though there may be fewer buyers out there, the price per share is lower than what it used to be earlier. You should also know that most big names like Apple Inc., Amazon.com Inc., Google parent Alphabet Inc., and Facebook Inc. have seen their prices drop by up to 50 percent over the past few weeks.
So why wait? Investing in stocks at such low rates could mean huge profits later down the line.
Reasons Why Investing Now is good
1) It's safer: If you were thinking of putting money into the stock markets, but worried about how safe it would be with all the uncertainty surrounding pandemic think again. There are many ways to protect you when investing in stocks. One way is through diversification, where you spread your investment across different sectors and types of businesses. Another way is through index funds which track indices like S&P 500 Index, Dow Jones Industrial Average, Nasdaq Composite Index. These indexes help investors keep tabs on the overall performance of the US economy. They also protect against volatility because they don't make individual bets on specific stocks.
2) Lower risk: You’re taking a bit of a gamble when you invest in stocks. But if you put your money into bonds, you'll get less return. However, if things go wrong, you won't lose everything. You might just break even. That's because bondholders usually receive payments only after other creditors have received theirs first. And unlike shareholders who stand to lose everything if their company goes bankrupt, bondholders still get paid off no matter what happens.
3) More opportunities: Since people aren't spending much due to coronavirus lockdown, retailers offer discounts and deals to attract customers. Companies are also cutting costs to stay afloat. As a result, there are plenty of bargains available for those willing to look around. For example, Walmart Inc., one of the world's largest retail chains, reported its lowest quarterly same-store sales growth rate in nearly two decades. Similarly, online retailer eBay Inc. (EBAY), whose business model depends heavily on selling goods made by small manufacturers, said it expects revenue to decline 30% in 2020 compared with 2019.
4) Less competition: Because consumers are staying home, demand for products is falling. Retailers are slashing inventory levels and reducing staff hours to cut expenses. Many stores are closing temporarily until further notice. Some are already closed permanently. All of this makes it easier for smaller players to thrive. Smaller firms often offer lower prices and greater flexibility. So while some large corporations will struggle as consumer confidence wanes, others can benefit from reduced competition.
5) Better Yields: The average annualized return on the Standard & Poor's 500 has been 10%. Over the last decade, the market yield an average of 9.6%. By comparison, the yield on U.S. Treasury notes was 2.8% in February.
6) No need to worry about inflation: Companies may not feel pressure to raise wages or pay more benefits with fewer workers at work. This could lead to higher profits without any increase in price tags. On top of that, low interest rates mean borrowing costs remain relatively cheap. Investors should expect these factors to continue over the next few years.
7) Higher dividends: Dividends are fixed-income investments that come out every quarter. While most dividend-paying stocks tend to trade below book value, they typically outperform during times of economic stress. A recent study found that since 1950, dividend yields have risen alongside rising unemployment.
8) Tax advantages: Stocks held outside retirement accounts such as IRAs and 401 plans generally generate tax losses. Those losses can offset capital gains generated elsewhere. If you hold shares through a brokerage account instead of directly through mutual funds, you don't incur taxes when you sell them. You do owe taxes when you buy new ones, though.
9) Easier access: It used to be challenging to find quality dividend-paying stocks. Nowadays, many major financial websites like Yahoo Finance make finding high-yielding stocks easy. They list hundreds of names based on criteria, including payout ratio, earnings per share, and current yield.
10) Lower risk: When investing your money, you want to minimize risks. But if you're worried about losing everything because of the pandemic, then buying bonds might seem safer than putting cash into stock markets. However, bond investors face their own set of challenges. Interest rates are near a record low, which means borrowers must pay more to borrow money. That puts downward pressure on corporate profit margins. And even if things improve, the long-term outlook remains uncertain.
11) More options: In addition to traditional investment vehicles like stocks and bonds, there are other ways to put your savings to use. For example, you can take advantage of government programs designed to help people weather the crisis. Or you can lend your money to small businesses that may otherwise go under. These loans aren’t guaranteed, so you won’t get paid back unless the business succeeds. Still, they provide another way to earn extra income.
12) Less competition: As mentioned earlier, it used to be hard for individual investors to compete with large institutions. Today, however, online brokers offer lower fees and better customer service. Plus, some firms allow customers to open multiple trading accounts from one location. All this makes it easier to diversify your portfolio across different asset classes.
13) Increased transparency: We know much more about how our economy works today, thanks to technology. We also understand what's happening around us thanks to social media platforms like Twitter and Facebook. The result is increased awareness among consumers. Companies will likely respond by offering greater transparency about products and services.
14) Better returns: Many experts believe that the U.S. economy has grown steadily stronger throughout 2020. So far, that growth hasn't translated into significant increases in consumer spending. Instead, Americans have cut back on purchases while saving more money. Economists say that trend will eventually change.
Once consumers start feeling confident again, they'll spend more freely. This should lead to higher economic activity and more enormous profits for companies.
15) Higher interest rates: One reason why inflation isn't rising right away is that central banks haven't raised short-term borrowing costs yet. Some economists think that could happen soon. Others predict that rate hikes will continue until at least 2021. Either way, higher interest rates mean less demand for low-yielding assets like Treasury bills. That should drive up prices over time.
16) Greater stability: If history repeats itself, the next recession will hit sometime between 2022 and 2023. The Federal Reserve will probably keep its benchmark lending rate steady or slightly increase them during those years. By contrast, during previous recessions, Fed officials hiked rates sharply as part of an effort to stimulate the economy. Those moves typically led to faster price declines later on.
17) A new normal: Even though the coronavirus pandemic is still unfolding, many analysts expect it to become just another chapter in American life. They see no end in sight to the current downturn. Instead, they foresee slow but gradual improvements in the months ahead.
18) New opportunities: While most people feel anxious about the future, others see opportunities where others don't. Investors looking for bargains could find themselves well-positioned when the market rebounds.
The global financial system remains fragile. But if recent trends hold, things might improve sooner than expected. And even if the worst happens, the long-term outlook looks bright.