Should You Consider Investing During COVID?

Most definitely, but first it is important to understand how things are changing. Covid-19 brought a lot of chaos and changes to people and entities all across the globe.  With Covid came significant financial challenges, but also potential investment opportunities, at least for keen investors.  In this article, I will attempt to make financial sense of a Covid world.  In doing so, I am hoping to provide a general look at investing during covid.

Conflicting Forces and Trends in a Covid World

To attempt to make financial sense in a Covid world, it is important to take a quick glance at the various conflicting forces and trends.

First, the stock market took a hit in March 2020, as the Covid pandemic developed.  Soon after, many businesses were forced to close their doors and employees filed for unemployment. 

Not surprisingly, governments across the world raced to prop up economies through monetary stimulus and lower interest rates. Interestingly, everything seemed to be going down at that point (stocks, bonds, oil, etc).

Soon the stock market began a speedy recovery despite anemic earnings and an uncertain future. Online businesses and tech stocks led the way up.

Eventually, many businesses and employees figured out ways of having employees work from home.

Surprisingly, the residential real estate market saw an increase in demand and prices, especially in rural areas. However, commercial real estate, especially office space, took a hit.  Retail real estate is likely to continue to struggle, as online businesses were able to more easily adapt to a Covid world. 

In addition, Multi-family real estate was challenged by tenants unable to meet their obligations and by eviction moratoriums.

As should have been expected, precious metals such as gold and silver saw huge price increases. Bitcoin and other cryptocurrencies exploded to new all time highs. And as of today, both precious metals and cryptos have continued climbing up, with a few setbacks here and there.

First Hand Financial Observations in a Covid World

During the early stages of COVID-19, I accepted a short work assignment in Arizona.  Given the nature of this assignment and the type of work I do (deemed essential work), Covid-19 had little impact on my work.  In fact, I worked very long hours, while many other folks, including some co-workers, “worked from home” for days and/or weeks. 

I am not complaining.  I am very grateful that I was able to continue to work.  As I’ve shared in prior articles, I am an engineer and earn a very good salary.  Having a good salary is great, but it is one of the reasons why it is difficult for me to transition from being an employee to being self-employed. 

Working such long hours made it difficult for me to dedicate time to this blog.  However, I never stopped looking for good investment opportunities.  In fact, being in a different geographical area is exciting for that same reason.  If you are an entrepreneur like myself, you probably relate.  I can’t help but to envision owning real estate and/or businesses wherever I go. 

For the first few weeks of my stay in Arizona I negotiated a rental of a VRBO home, directly with the owner. The home was very comfortable and it had a pool and a Jacuzzi.  Even after negotiating, the rent was a steep $3,000 per month.  Naturally, one of the first things I did was run the numbers on owning a VRBO.  It didn’t take me long to reach the conclusion that VRBOs are not for me. 

I want fairly passive income and VRBOs seem like too much work.  In addition, I still fail to see how people make good money with this business model.  Maybe it isn’t so bad if you live next door or nearby, in which case managing a short term rental wouldn’t be too difficult.

While driving around I noticed a large RV park for sale.  I contacted the owner and got enough information to run some numbers.  The owner asked for $700,000.  The numbers looked good, but unfortunately the town where the park is located is way too small and I know all too well the challenges of owning property in small towns.  So, I ended up passing on this opportunity, but I wrote an article about this and there is quite a bit of interest from potential buyers.

See Arizona RV Park for Sale by Owner

These days I am not necessarily interested in investing in residential real estate.  However, I ended up making an offer on a home in a very nice neighborhood, with a beautiful mountain view. 

My thought was that, since I was going to be living in the area for a few months, I could easily flip a house and/or keep the house as a rental.  In fact, the idea of owning a home in Arizona became pretty attractive.

Interestingly enough, there were three bids on this house.  I couldn’t figure out why at the time, but that was the case.  Later I found out my offer was the highest of the three offers, but the seller preferred to go with a lower cash offer. 

After that, I kept looking for other opportunities to buy a home.  However, homes in Arizona are selling fast.  In fact, I found another home I felt could be a good investment.  But this home had multiple offers within 24 hours after listing, and they were all cash offers. 

I was surprised to see people rushing to buy homes in the midst of the Covid pandemic.  Even my realtor was surprised at the strong market activity.  It seemed to us people from California are moving from bigger cities to smaller cities in Arizona.  But, apparently this is not a local phenomenon.

Later I spoke with a realtor friend of mine that lives in Montana.  He said the same thing was happening there.  Somehow the residential real estate market in Montana was very strong.  And this also seemed to be happening in the Pacific Northwest.

Gold and Silver Investing During Covid

Regarding my observations about stocks in this Covid world; I’ve shared before that I am reluctant to invest in the stock market.  However, I’ve been a gold and silver investor for a long time and when it comes to investing in mining stocks I am significantly less reluctant.

In previous articles, I made the case why investing in gold and silver right after the stock market crash in March of this year was a very attractive proposition. See “Where Should You Invest After the 2020 Market Crash“

Fully aware of the opportunity (click on image below for related articles), I did invest healthy sums of money in gold and silver stocks, in March of 2020.  My best performing stock (Fortuna Silver) is up 230% since then.  By the end of 2020 I sold about half of my position at a gain of about 190%.  

Stock Investing During Covid

Like many other investors, I was also drawn to some beaten stocks.  I ended up investing a small amount of money in a couple of airline stocks that took a big hit in March (American Airlines and Delta Airlines).  Part of my logic was that the US Government was not going to let big airlines go out of business, and as such the risk/reward ratio was in my favor.  

A few weeks later I was looking like a genius when these stocks doubled in price.  Soon these stocks went down again.  I ended up getting out of these positions after I reminded myself to not play the stock market.   Today these airline stocks have double in price since March of 2020. My instinct was right, but my precious metals investments did much better.

The fact is everybody that bought stocks at the low of 2020, or even after the low is looking like a genius. This is why it is best to have a long term mentality when buying stocks.

Brick and Mortar Businesses

Some brick and mortar businesses have performed exceptionally well. Others like hotel and travel related businesses have been hit hard.

I visited a furniture store in the Pacific Northwest.  I had the opportunity to talk with the owner of the store.  He shared with me that he could not keep up with inventory, because demand was so strong.  His conclusion was that white-collar workers were still making good money and now that they were confined to their homes, due to Covid, they spent more money in upgrading their homes.  Similarly, people were happy to spend money on home improvement projects, all over the country. 

In January of 2021 I stepped into a store that sells jacuzzi hot tubs. Amazingly, this store saw record sales in 2020 and expects to see even higher sales in 2021.

On the other hand, hotels, resorts, restaurants, office space owners and others are struggling. I haven’t researched this, but I know many restaurants that have gone out of business.

I wouldn’t want to buy a restaurant at this point. However, investing in a hotel or a cheap office building may make some sense.

Online Business Investing During COVID

The businesses that were best positioned to do well were online and technology businesses. Large companies that already had an online presence have performed extremely well. Amazon, Walmart, Target, etc have only increased their market share compared to the smaller and less online experienced companies.

For a while now I’ve been looking to invest in an online business. Investing in a website in this day and age makes a lot of sense to me. In fact, sometime last year I contacted a website broker. However, as of now, I am still looking.

Crypto Investing During COVID

In 2017 I bought a small amount of Ethereum. This was mostly to gain some exposure and force me to learn more about this market. By March of 2020 my initial investment had declined 96%! I was counting this as a loss. However, Bitcoin and all other altcoins began climbing and overperforming all other asset classes. My small crypto investment has gone up 6x in value since I first invested.

By the end of 2020, after seeing Bitcoin skyrocket to new all time highs I decided to buy more Ethereum. This time my investment was 20X higher than my original investment. And I am happy to report that since the time I added to my original position, my investment has nearly doubled. As of now, I am bullish in the long term potential for Ethereum. However, I am not as bullish on Bitcoin.

Crypto investing during COVID has been absolutely phenomenal. However, it is hard to imagine crypto will continue to outperform all other markets. Time will tell.

How do We Make Financial Sense of a Covid World?

A rising stock market and a strong residential market, in the midst of a pandemic and lower corporate earnings, doesn’t compute in my head.  I find the most logical explanation is that the government’s actions to stimulate the economy created a sense of security, where investors and home buyers felt confident enough in the US economy.  Investors saw an opportunity after the March stock market crash and were willing to buy despite an uncertain economic outlook. 

Similarly, home buyers saw an opportunity with extremely low interest rates, despite the economic uncertainties.  In addition, it appears a significant number of home buyers were looking to get away from large cities and into more rural areas.  Another factor could be that some people feel working from home allows them the opportunity to upsize their homes. See Bloomberg opinion “A Pandemic Is a Terrible Time to Buy Real Estate“

Conclusion

Now that we’ve made some financial sense of a Covid world, the real question is where do the markets go from here.  When it comes to investing During COVID, I personally think the stock market can’t continue to go up at the current pace.  Thus, I expect a stock market correction.  Given all things (including increased debt), a stock market correction, a market crash, and/or a monetary default could very well unleash a domino effect throughout the entire US economy. 

Thus, how should we protect our wealth and what areas of the economy could present an opportunity for savvy investors?  There are too many variables and forces at play to be absolutely sure.  However, a few things should be fairly evident to keen investors.  Join me, as I continue exploring this fascinating subject.  If nothing else, please don’t leave this website without checking out the article below.

‘The bridge to financial freedom’

This article outlines the entire strategy for those pursuing financial freedom, regardless of their financial situation.