In 20, 50, 100 years from now, historians will be writing books and articles talking about how the Covid-19 pandemic was a major turning point globally. While it is hard to say which direction the pandemic has turned the world, there is no doubt that it has changed the world. The same way World War II, the fall of the Soviet Union, the invention of the internet, the automobile, the Great Depression, the attacks on 9/11, the financial and housing crisis in 07-08 all changed the world in some way, this pandemic will do the same.
As an investor, this is very important to understand because it means that the way you should invest if you want to maximize returns and/or reduce risk could also change as you read this. You have to remember; we have been experiencing this pandemic for more than a year now, and most behavioral scientists will tell you that it takes about 6 months for habits to form fully. Whatever new habits people have picked up, or bad habits that were dropped during the past year, are probably here to stay.
For many, working from home is one of those “new” habits. It’s going to be difficult for many Americans to work in a formal office setting 5 days a week in the future, since for more than 1 year now, they have been strictly working from home. The rise of at-home workouts provided by companies such as Pelton (PTON) has become a daily habit and shows signs that it is here to stay. More social media use more online shopping, fewer small retail stores that were shut down during the pandemic or just couldn’t survive and compete with the larger retail chains. People moving out of cities for more space or moving further south for warmer temperatures year-round.
There are certainly more changes occurring in some ways because of the COVID-19 pandemic, but we can’t list them all here, and some of them may not even be known at this time. That is where the problem for investors lies.
As an investor who knows that the world is changing and will never be the same as before, how do we invest in the future when it’s hard to predict what it will look like?
Before we answer that, let me ask you one other question, how were you investing at the beginning of 2019?
At the beginning of 2019, there was concern about the trade war with China, who would be the Democrats nominee for President to run against Donald Trump; there were many other issues rolling around and concerns for investors. At that time, I could not have predicted what the future was holding for us, and honestly, neither could anyone else. The same could have been said at the start of World War II or a year before the Soviet Union collapsed, or months before the first form of the internet being tested.
How you should invest today, knowing that the world is different than it was a year and a half ago and that it will never be the same, should be in some ways the same. Yes, you need to make some changes based on consumer spending habits and lifestyle changes, but you should still be basing decisions on information that we have at hand today. Obviously, the most important thing is that you remain invested because, as we saw one year ago, while the market will fall from time to time, it always comes back stronger in the future. It just may take longer at times than others.
If you have no idea or care to know what industries will or could perform well in the future, that is fine also. Invest in simple S&P 500 indexes and go on with life. ETFs like the Vanguard S&P 500 ETF (VOO) or the iShares Core S&P 500 ETF (IVV) or even the SPDR S&P 500 ETF Trust (SPY) all have a low fee’s, are well diversified, and offer investors the best bang for their buck if they don’t want to be heavily involved in their investment decision making.
Over the long run, these funds will provide great returns for investors, regardless of what the markets do in the short term or how much the world changes due to the Covid-19 pandemic or any other major world events that will occur in the future.
Disclosure: This contributor owned shares of Pelton and manages a portfolio that owns shares of the Vanguard S&P 500 ETF at the time this blog post was published. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.