Investing in the coronavirus pandemic and other difficult markets

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Investing is a challenge during the best of times, but what do you do during the coronavirus pandemic or other difficult times? As it turns out, a crisis can be one of the best times to invest if you play your cards right. Here are several things investors can do to avoid making bad investing decisions in the coronavirus pandemic and difficult markets.

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Q1 2020 hedge fund letters, conferences and more

Investing in difficult markets may not be so bad after all

One of the hallmarks of investing during the coronavirus or any other crisis, for that matter, is the fact that most assets move lower. This provides an opportunity to get into some investments that you weren't in before because they are cheaper than they were.

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You may have to put up with declining trends for a while, but if you time your investments right, you can get in toward the bottom and enjoy a nice bounce when the markets recover. This does involve choosing the assets that will rally after the crisis is over, but with a little bit of research and perhaps some advice, you can choose your investments wisely.

Investing in the coronavirus pandemic or other difficult times will also make you a better investor. The problem with investing during a bull market, especially one that's been as long as the last bull market, is that it lulls us into a sense of indifference. It seems like the only way the markets can go is up, but that's not always the case. Sooner or later, a bear market will arrive.

Prepare your ideas before the crisis happens

The best thing you can do when it comes to investing in difficult times is to prepare ahead of time. A properly diversified portfolio won't take as big of a hit when the markets crash suddenly like they did in March.

While it's true the investments that normally fall during a time of crisis will indeed crash, the investments that normally do well during a bear market should provide some downside protection so you don't lose as much as you would have if you hadn't been prepared.

Another reason to prepare before the crisis hits is because it allows you to make a list of the stocks or assets you would like to purchase after prices fall. You may keep companies on your radar for a while before buying them. Sometimes they're simply too expensive, but then when a crisis hits, they become cheap temporarily. This is the perfect time to dive in.

Don't get carried away by emotions when investing in difficult markets

One big problem with investing in difficult times is news headlines. A common problem among investors is having knee-jerk reactions to headlines. During a crisis, this risk only increases with the number of negative headlines.

In fact, many investors find that they underperform the rest of the market precisely because they invest with their emotions. They buy at the top and sell at the bottom instead of buying low and selling high. Warren Buffett advises investors to be fearful when everyone else is greedy and greedy when everyone else is fearful, and this is why.

If you take emotions out of the equation, investing in difficult times becomes easier. You make decisions with a level head, and you're more likely to capture upside. You're also less likely to chase performance, missing out on the returns you could've had if you had prepared ahead of time.

When you're in the middle of making investment decisions, it may be a good idea to take a break to clear your head.

Investing in difficult times can be tricky, but it doesn't have to mean that your portfolio crashes with the rest of the market. Proper diversification, planning and keeping your emotions out of the equation will all help your portfolio when a crisis like the coronavirus pandemic hits.