4 Investing Lessons the Pandemic Has Taught Us

The coronavirus pandemic has taken a huge hit on the economy and many individuals’ financial security. It has also caused massive swings in the stock market’s performance throughout the year, which could certainly be unnerving to anyone who is invested in it.

See: 10 Stocks That Could Bounce Back in 2021

But all the uncertainty this year has taught us some very important investing lessons and reinforced some tried-and-true rules of thumb. See the four important investing lessons we’ve learned from the pandemic this year.

It's Important To Invest In an Emergency Fund

Before investing any money in the market, it’s important to save money in an emergency fund to be prepared for an unexpected job loss or long-term illness — both of which have become more frequent occurrences during the coronavirus pandemic.

Betterment surveyed 1,000 investors in March, July and September, and found that this is a lesson many investors took to heart. In March, 66% said they have an emergency fund in place; by September, that number had grown to 84%.

Check Out: These 10 Stocks Are Gifts That Keep on Giving

Stay Focused on Long-Term Goals

Your retirement saving strategy shouldn’t be affected by fluctuations in the market. This is a lesson that investors seem to have learned over the course of the year — as of the September Betterment survey, 57% of investors said that the pandemic had not changed their approach to saving for retirement.

“Seeing more investors adding to their savings while mostly leaving their approach to retirement unchanged is exactly the balance we would hope to see,” Betterment experts said in a blog post. “Having accounts to meet short-term goals means that accounts to fund longer-term goals — such as retirement — can remain untouched and continue to grow.”

Look Back: The Biggest Stock Climbs of 2020

Don't Overreact To Market Volatility

When the pandemic first hit, the stock market took a nosedive, reaching a low point on March 23. But since then, the Dow Jones Industrial Average and S&P 500 each have soared more than 50%, ABC News reported.

When the market is underperforming, it could be tempting to take money out of it — which is what 20% of investors did in March, the Betterment survey found. But by September, investors had learned to ride out the ups and downs — only 14% said they had taken money out of the market in the last six to eight weeks.

“It is great to see the number of people removing money from the market in the face of volatility trickling downward,” the Betterment experts said. “But ideally, the number of people withdrawing from the market should be even lower: investors who react to volatility this way may be doing themselves a disservice in the long-run, potentially costing themselves gains by waiting for the market to recover.”

Find Out: The Most Surprising Stock Market Trends of 2020

Maintain a Diversified Portfolio

This year’s market volatility reiterates the need for maintaining a diverse portfolio. Investors should spread their wealth across numerous investment vehicles, which can include IRAs, individual stocks, 401(k) plans, mutual funds, CDs, individual bonds, ETFs, commodities and crypto.

The Betterment survey found that many investors are actively investing in a diverse portfolio, which its experts said is a good thing: “It is great to see the diverse vehicles that our respondents are invested in, beyond just a traditional 401(k) or IRA.”

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About the Author

Gabrielle Olya

Gabrielle joined GOBankingRates in 2017 and brings with her a decade of experience in the journalism industry. Before joining the team, she was a staff writer-reporter for People Magazine and People.com. Her work has also appeared on E! Online, Us Weekly, Patch, Sweety High and Discover Los Angeles, and she has been featured on “Good Morning America” as a celebrity news expert. 

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