Top 3 Investment FAQs: COVID-19 Edition

Toilet paper shortage, travel plan cancellations, stock market downturn - these are just some of the worldwide effects of the pandemic COVID-19. The feeling of increasing panic lies at the root of this situation. Questions keep on popping as panic-filled days go by without knowing its definite end.

How should we position ourselves financially amid this turmoil? Below are the top 3 financial FAQs concerning COVID-19:

1. What should I do with my investments (TFSA, RRSP, RESP)?

The market dipped since the outbreak mainly because many companies, specifically tourism-related, are experiencing a significant hit to their profits. My recommendation is for you to stay invested until the market corrects itself - aka "ride it out". Why? If you withdraw your investments during this time (when you're still in the negative), you will realize your losses; you will miss the chance to earn your losses back.

2. Should I continue my investment contributions?

Yes, you should and it's wise to do so! Every time you contribute (weekly, bi-weekly, or monthly), you buy X number of units which is dependent on the current market price. If the market is down, your contributions are buying you more units (it's like they are on sale!). When the market eventually goes back up, and you have more units on-hand, your total fund grows more. Imagine a sago pearl (the one that you use in bubble teas). The more pearls you have in a cup, the further magnified the growth is when water is added.

3. Will my investments recover the losses?

Yes, it will; as long as you stay invested. The real question is when, which is impossible to predict. The rapid spread of COVID-19 took the world by surprise. As we are still waiting for the doctors to come up with a vaccine to place an end to this outbreak, we cannot forecast when the market will find its balance. It is important to note however that, although the virus may have been the root of the market downturn, it is not the only factor that will dictate the performance of the market (other factors include: oil prices, consumer spending, etc.).

It is normal for us to panic especially if it's not only our safety that is at risk but also our investments - no one wants to see losses in their hard-earned dollar. In situations like this, however, it is beneficial to re-asses whether we should perceive the virus-induced market as a threat or as an opportunity. It's easy to see the former and miss the latter, which is why financial advisors are here to guide you and relieve you from more stress. Although panic is normal, you have a choice to not let it dictate your actions.

Praying for everyone's safety!

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