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The COVID-19 crisis has sent the
stock market on a wild ride over the past few months, and while volatility may
be a scary thing, it's not an unusual one. The reality is that this isn't the
first time the market has seen massive swings in the span of a few short weeks,
and with stock values still being relatively low, now's actually a good time to
invest in it. But before you put money into stocks, it pays to check these
important items off your list.
Make
sure your emergency fund is solid
Investing in stocks is a smart thing to
do with your spare cash -- money you aren't using right now, but also don't
expect to need in the near term. In fact, a good rule of thumb is to only
invest money you don't expect to have a need for in the next 10
years. Sometimes, we don't realize we need the money we invest until
it's too late and that cash is tied up. Rather than run that risk, do a
thorough assessment of your emergency fund.
Assess
your existing portfolio
Right now happens to be a good time to
invest if you have the cash and are good on emergency savings. But before you
load up on more stocks, figure out which ones you already have. If there's a
specific segment of the market you're already heavily invested in, it could pay
to look at different areas to better diversify. In other words, if you own a
number of bank stocks, you might consider focusing on healthcare
stocks right now, or auto stocks. And if you're really looking to
ramp up on the diversification front, consider an S&P 500 index
fund.
Be
careful with hard-hit industries
Stocks can be risky investments in
general, but right now, there are certain industries that are really feeling
the impact of COVID-19 -- namely, airlines, cruise lines, hotels, and
anything travel-related. we don't know what
their recovery will look like, so make sure you do your research and focus on
quality companies with strong business models and solid finances in spite of
the crisis.