The COVID-19 breakout and the ensuing market slowdown has led to a lot of people asking the same question. Are my investments safe?
Since February, the global stock market began to fall, and the loss was quite significant in the U.K., especially during March. Now, the market is showing signs of recovery, but it still is volatile. It is not only the U.K. market that suffered due to the COVID-19. Markets in the U.S. and India also showed a significant decline.
Dividends: How Are They Affected
After the market slowdown, various companies across the U.K. either stopped the dividends or delayed them. Banks and insurance sectors suffered the most and had to stop dividends. However, people who invested in tobacco, food retail, and utility sectors fared much better and received returns on their investments.
How are the investors reacting to the termination of dividends? They are on edge as we do not have a full picture of the impacts of COVID-19 on the long run. There is a possibility that most industries would see huge profits as lots of people would come out of lockdown to buy products. This surge in buyers might lead to better returns later. Most investors are also relieved as the dividends are mostly suspended or delayed instead of being axed.
How to Protect Your Investment?
The next big question is how to protect your investments. If you have invested in a long-term scheme, then the best option for you is to wait. Any investment for more than five years would have a negligible impact of COVID-19.
If you are a restless person, then it is an apt moment to think about what your market goals are. If any you can do anything to improve the situation and get a step closer to your goal, then go ahead.
The next important step according to the best stock brokers ranked by learnbonds.com
is to diversify your investments. If you invested heavily in airlines only, then you would suffer a monumental loss. On the other hand, if you invested in various industries, then the profits from the food sector would help you cope up with the losses in the tourism sector. So, you would not lose a big chunk of your wealth.
Still, you should not spend exclusively on shares, consider investing in other asset classes as well. Gold and government bonds are an excellent secondary option as they offer returns regardless of the market trends.
Accept the fact that the market is unpredictable. You will see profits as well as losses when you invest. As a result, calculate the risk factor and then spend carefully.
Gold is termed as a haven for investors. It is an asset whose price either stays constant or increases, irrespective of the market trend. People who invested in gold in 2019 saw a 31 percent profit even during the COVID-19 pandemic. The price of gold soared when the stock market was declining. The increase was not smooth, but it was way better than that of other assets.
One major problem with investment in gold in the current scenario is its price. Gold is going for $1,859 an ounce, now. The returns would be great later, but at the same time if you buy stocks which have seen a massive decline in price, you will get a better result after the market stabilizes.
If you still want to invest in gold, then you might want to check gold stocks
. A lot of people who are unsure if they want to invest in physical gold opt for gold stocks instead. Gold stocks are issued by companies who are linked with processing and mining of the precious metal.
Remember that you would be taxed when you sell these gold stocks. You can also invest in gold exchange traded funds. They are a better option than investing in a mining company as the value of these funds has a more direct relation to the value of the precious metal. Alternatively, you could invest in physical gold as well. Some forms of physical gold such as coins are often exempt from taxes.
Disclaimer: The views, suggestions and opinions expressed here are the sole responsibility of the experts. No Forbes India journalist was involved in the writing and production of this article.