Investment Risk During and After COVID-19

Investment Risk During and After COVID-19

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Investment risk is always present, but during COVID-19, the stock market has experienced so much volatility that investors are beginning to wonder where to invest. Investors must consider how investment risk can decline their portfolio’s value due to economic events that impact the entire stock market.

The primary investment risks to a portfolio are equity risk, interest rate risk, and currency risk, which is when investors choose to invest in other countries with stable interest rates and currencies and not their own country’s offerings. This risk creates a loss of economic confidence for domestic investors who choose not to invest in their local economy.

Investors should take the time to investigate the U.S. company stocks in their portfolio to determine how they pay out dividends, and if the payout is reliable during this period. Other considerations investors must address to offset investment risk:

  • Keeping mostly cash in a portfolio can create other risks such as inflation risk and time-horizon risk.
  • Taking more market risk during a recession can reap higher returns later when the market recovers.
  • Examine investing in foreign markets or emerging markets to determine if these investments may provide positive returns if their economies recover ahead of domestic markets.
  • Modify allocations appropriately, rebalance, and continue to invest using dollar-cost averaging.
  • Maintain a diversified portfolio, which is the best way to offset Investment risk.
  • Longer time horizons help reduce the impact of investment risk; investors should stick to their overall investment objectives and overall portfolio, not individual holdings.

Investors must remember that with more risk comes more reward and that the lowest risk investments are the ones that also produce the lowest yields. Additionally, remember that no investment is without risk.

During COVID-19, it is essential to continue to work with your advisor to determine a strategy that fits your risk profile. With unemployment high and the economy down, volatility will continue as investment risk for certain types of investments progresses. Remember that letting your money sit idle during this period may mean missed opportunities for your portfolio. Don’t miss out – review your portfolio today with one of our fiduciary advisors.

© 2024 Trajan® Wealth LLC. Nothing in this blog is intended as investment advice, nor is it an offer to buy or sell any security. Please consult your financial advisor for questions about your personal financial situation. All investments involve risk, including the potential for loss. Trajan Wealth clients and employees may have a position in any of the securities mentioned. Portfolio holdings and other data are subject to change at any time and without notice. Additionally, the above links provided as a convenience and for informational purposes only; they do not constitute an endorsement or an approval by Trajan Wealth, L.L.C., of any of the products, services or opinions of the corporation or organization or individual. Trajan Wealth, L.L.C., bears no responsibility for the accuracy, legality or content of the external site or for that of subsequent links. These materials are for informational and educational purposes and are not designed, nor intended, to apply to any person’s individual circumstances. It does not take into account the specific investment objectives, tax and financial condition, or particular needs of any specific person. Please consult with your legal and/or tax advisor before making any tax-related decisions.