How to start investing during turbulent times

Everyone talks about it, but nobody really knows all the details. “It's a good time to start investing now! Buy the dip. Markets are so cheap now!” You can hear these phrases all the time, read them everywhere. But, how does it really work? And when would you actually benefit from a start in these (to be honest, a bit scary) times?

What do (new) investors really want to know?

Selma’s contributors started to ask questions in the dedicated Facebook group – this article aims to answer them. One of the highest voted questions in a recent poll was: Is now a good time to invest (more)?

The answer has many “ifs” and layers, but in general it’s a yes! And why? Let’s find out in Selma’s 7 rules for you to get started during turbulent times on the markets.

Selma’s top 7 tips to get you started with investing now

1) Make sure you’re financially stable first

Right now, times are uncertain due to the coronavirus pandemic. Neither you, nor the Selma crew knows how quickly our lives will get back to normal. That’s why you should keep at least 3-6 months’ worth of expenses in cash on your accounts, in case your income stagnates or unexpected costs occur. Only if you have extra money after calculating this “cash buffer”, you should think about investing!

2) Aim for the long-run

Only invest the money you won’t need any time soon. This way, you lower the risk of having to take it out when markets have just dropped again. 📉

Currently, you can buy investment products for a cheaper price than a couple of months ago. But, as nobody knows how long the markets will continue to act in a rather “jumpy” manner, you have to brace yourself and really prepare to see gains in the far future.

3) Go global

Also known as: “Diversify!”

This term is often used to simply explain that you should not only invest in only one company or one geographical market. Focusing on one stock, country or specific investment product compares to betting rather than investing! 🎲

That means investing would be a “hit or miss” roulette, rather than a steady way to grow your wealth.

By investing in products all around the world, you make sure that you won’t lose all your money if, for example, the European market sacks. It also means that this way, you will see growth in your wealth when the world’s economy grows.

Admittedly, in case you think our world will actually go down in complete chaos, and our markets will never recover, you should rather invest in toilet paper. It’s supposed to be a very valuable currency. 😉

4) Start small and invest regularly

You’ve decided to invest? Grand! Now it’s time to set your “tactics”. This is about the fieldwork. 🤓 Even though markets are rather cheap now, nobody knows if they might get even cheaper – or more expensive.

Split your investment sum in a couple of steps and start investing regularly. This can mean every 3 or 4 weeks, depending on what fits your situation best.

Investing step-by-step will allow you to buy more when markets are cheap and less when markets are more expensive – over the long-term this gets you a smart and lower purchase price, also known as the dollar-cost averaging effect.

Good to know: If you decide to invest with Selma, Selma will automatically invest your money step-wise once it has arrived on the account.

5) Take advantage of compound interest

This tip is about long-term investing again. Making sure you understand that you can minimize risks by investing for many years will allow you to make it through scary times in the market. After all: “Time in the market is more important than timing the market”.

How long is long-term? Thomas Pirker, our in-house investment expert, says you should commit money for about 10 years and longer. That’s when you’ll see compound returns really kick in! 

6) Choose cost-efficient products

You already know that investing in many different markets is smarter than investing in single stocks. That’s where ETFs as a choice of investment products come in.

An example for an ETF would be the iShares SMI ETF. It covers the 20 largest companies listed on the Swiss stock exchange. By buying this ETF you “invest in the Swiss market”. 🇨🇭

When you mix a couple of different investment products like ETFs, you can build a plan that really fits your life and the risks you should take.

Furthermore, watch out for fees. If you invest long-term and regularly, you should know exactly what you pay for when choosing a service.

7) Prepare emotionally

Yes, your investment’s value might drop right after starting with your investments. That is very likely right now – but nobody knows, you might also make $$ on your first day of investing. Unfortunately, as nobody can really tell you how the markets are developing, investing is nothing for the faint-hearted. 🎢

Stick with it!

I personally like to look towards a very poetic quote from Jack Bogle: “Your success in investing will depend in part on your character and guts and in part on your ability to realize, at the height of ebullience and the depth of despair alike, that this too, shall pass.”

Side note: If you have also a topic in mind you would like to see the Selma crew talk about in a blog post - feel free to join our contributors group and raise your topic there. 😃