Pandemic Investing: How to COVID Proof Your Financial Portfolio
By: Darien Dash
Tags: Covid, Portfolio, Investing, Finance, Pandemic

The arrival of COVID-19 in Europe and its spread throughout the world has made traditional investing very difficult. The usual methods of forecasting and modeling just don’t work when you don’t know if businesses are going to be able to operate, if consumers are going to feel safe visiting stores and comfortable spending money, and if supply chains are going to be dependable. As of October 29, the FTSE 100 had fallen 27 percent and the number of COVID-19 cases around the UK and other parts of Europe has rebounded.

The good news is that as an individual investor, you may find that you have some extra money to invest right now, money that you would otherwise have spent doing things like going out to eat, going to see a movie, or traveling abroad. Some online trading platforms, such as AJ Bell, are reporting heavier than usual volume since the pandemic began. Despite all of the market uncertainty surrounding the pandemic, there are still opportunities to be had in the market in these turbulent times, if you know where to look.

Finding investment opportunities during the pandemic

Where should you put your money in this pandemic market? Take a look at the following categories:

1. Gold. Precious metals are a traditional safe haven in uncertain financial times, and today is no different. As of October 21, the price of gold has risen 21 percent since the beginning of the year, a decent return in any market. Keep in mind that mining stocks, those companies that mine gold, can also be an attractive investment during a pandemic. Keep an eye on Newmont Mining, the largest gold mining company in the world, and the only gold mining company on the S&P Stock Exchange.

2. Travel and entertainment stocks. Another place you might want to look at is travel and entertainment stocks. These stocks have been particularly hard hit since the end of the 1st quarter, as travel bans were put in place, restaurants shuttered and consumers advised to stay at home. Those companies that will eventually rebound after the pandemic is over are likely undervalued now. The trick is choosing those companies that will survive and not be forced into bankruptcy by the pandemic. AJ Bell reports that their most heavily-traded stocks for July included the fashion firm Boohoo and British Airways’ parent company International Airlines Group.

3. Biotech and pharmaceutical firms. These companies will likely have a role to play in ending the pandemic and treating those who contract COVID-19. Several companies in the UK and abroad are working on a vaccine and others are working to develop effective therapeutics for COVID-19 patients. Recent heavily-traded stocks in this sector include Synairgen.

4. Robotics engineering and AI companies. As traditional workforces and supply chains become more unpredictable due to the pandemic, it’s a good bet that manufacturing companies will increasingly look to robotics to augment their labor pools and to automate many of their inventory, packing, shipping, and loading functions. Companies like Keyence, the Japanese company that is the world’s leader in factory robotics technology, is likely to see a dramatic uptick in value.

5. Companies that facilitate services from home. Had you heard of Zoom a year ago? If you had, you probably wouldn’t have thought that this teleconferencing company would become the go-to app for every business person, teacher, board member, and extended family around the world as offices and schools shut down and individuals and families sharply restricted their trips outside of the home. As of November 10, Zoom Video Communication’s (ZM) stock value has increased by more than 600 percent since the beginning of 2020.

Companies that help consumers get groceries and restaurant meals without having to leave them homes have also experienced a boom. One of these companies is Ocado, the British online supermarket. Says James Lockyer, an analyst at Peel Hunt, “This company could end up revolutionising the entire (grocery) supply chain over the coming years.” It’s certainly a stock to watch.

6. Companies that offer small luxuries. When times are uncertain, consumers tend to forego big expenditures, like vehicles, appliances, and expensive jewelry. Historically, however, they do reward themselves with small, non-essential items. After the 1929 stock market crash, movie theaters were packed, as consumers looked for a cheap way to enjoy themselves. Obviously, movies aren’t the answer in 2020; most movie theaters are closed. However, the same principle applies. During the pandemic, look for companies that sell make-up, medium-priced jewelry, or cabins without a day’s drive.

Tips for investing wisely in a turbulent market

The way you invest can also, in large part, influence your returns. In a pandemic, there are steps you can take to make sure that you maximize your returns. Just a few of these include…

1. Investing the same amount of money every period. Investing a set amount each period, religiously, is a tried and true investment strategy that works in any type of market. The strategy works because when the market is down your set investment will purchase more shares and thus, when these shares are held for the long term, have a greater opportunity to increase in value.

2. Diversify your portfolio. As attractive as any of the categories we discussed above may seem to you, it’s essential that you put your money into more than one category. That’s good advice at any time, but during the pandemic, no one knows what tomorrow may bring to the market. Having a diversified portfolio will help ensure that some of your investments grow even if some begin to decline.

3. Be disciplined. It’s easy to panic when the market is dropping. However, the exact wrong thing to do during such times is to sell all of your investments and stow your cash in a shoebox under your bed. Instead, take a deep breath and stay your investment course. It helps to know that the Standard and Poor’s stock index has increased by more than 1000 percent over the last 30 years. That includes the recession of 2007 and the sharp market drop following 9/11. The point is that a diversified portfolio held for the long-term generally increases in value, despite market fluctuations.

When the dramatic ups and downs in the FTSE and other world markets during the pandemic, you might be tempted to refrain from investing until the pandemic is over. However, this unique time in our history offers a number of opportunities. Look for precious metals, companies that provide a service or product that’s necessary right now, and those companies that may be depressed right now, but will likely rebound strongly when a vaccine is created and distributed and we can all feel safe leaving our homes again.