The effects of the COVID-19 pandemic on the global economy have been unprecedented. Projections from the Asian Development Bank showed the pandemic could cost the world’s economy up to $8.8 trillion.
Furthermore, the Bureau of Economic Analysis announced that the real gross domestic product (GDP) of the United States shrank by 32.9% in the second quarter of 2020.
But amidst the economic storm triggered by the pandemic, smart investors are making a fortune. Investments in strategic sectors have been appreciating. Here are the best places to grow your money during the COVID 19 pandemic.
15 BEST INVESTMENTS DURING COVID-19
Self-storage is one of the best investments you can put your money in the pandemic. The self-storage niche has not been as much affected by COVID-19 as the generality of physical real estate.
While many other real estate investing asset classes were dropping, the annual revenue accrual of the American self-storage industry climbed to $39 billion last year. Very few real estate niches posted these healthy returns.
This is due to swells in demand for storage, which is not just short term. Yes, such demands are not unconnected to population surges (needing more real estate space) and people’s natural tendency to acquire and accumulate stuff.
Therefore, pandemic or not, people will always need storage. This includes regular American families and businesses. American households need storage so much that reports show that 9.4% of all American families rent a storage space.
Investing your money in self-storage makes sense if you are keen on real estate investment. Income derivations are more stable and predictable. Since tenants don’t stay full time in self-storage spaces, there is usually reduced management and maintenance needs. Also, when compared to other commercial real estate properties, self-storage facilities are cheaper to construct.
There are several ways to invest money in self-storage in the pandemic. You can go with self-storage real estate investment trust (REITs) or participate actively when you buy or build a self-storage facility.
This is one of the smartest ways to invest today. Fintech refers to technologies that enhance the efficiency of financial services.
The fintech industry has shown resilience amid the ongoing pandemic. While 17% of other high-growth companies were severely affected by the pandemic, only 1% of fintech companies were.
Traditional banking is handicapped by a lack of innovation, rigidity, and legacy operating systems. These deficiencies were even more apparent in the pandemic.
The fintech industry boasts agility, equity finance, and receptiveness for remote working. This enabled fintech companies to withstand the pandemic better, decreasing their risk exposure, cutting costs, and even a downsizing workforce with no corresponding loss in output.
Indeed, fintechs were among the major beneficiaries of digital transformation (adoption of digital technologies) activated by the pandemic, placing them among the best investments for your money.
Last year, fintech companies pulled in $135.7 billion investments, with the industry expected to be worth US$26.5 trillion in 2022.
We expect fintech to amplify its disruption of banking, insurance, personal finance, venture capital, and general wealth management. With all these advantages, it is wise to start investing in fintech now.
3. US Treasury Inflation-Protected Securities (TIPS)
Investors whose risk appetite has been reduced by the pandemic could resort to investing in US Treasury Inflation-Protected Securities (TIPs).
TIPs are issued by the US Treasury, having a fixed interest rate. These bonds mature within 5-30 years. Upon maturity, the investor receives the adjusted principal.
These bonds are structured to safeguard the investor in the long-term against inflation. TIPs pay a coupon on the bond’s principal, which varies from time to time. This way, investors retain their purchasing power over a longer span.
When you invest money in TIPs, there is a reduced chance of principal loss. Investors can procure Treasury inflation-protected bonds on exchange-traded funds or the Treasury Direct website.
Aside from being one of the best investments (regarding safety globally), TIPs offers you an opportunity to diversify your investment in the pandemic. This is because these bonds don’t strongly collate with the regular class of assets in a portfolio like other mutual funds.
TIPs are also attractive investments for your money during the pandemic thanks to tax exemptions (on a local and state level). This is not exclusive to TIPs as all treasury securities exercise this privilege.
Investors also earn interest accruals from these bonds, which are paid within 24-week intervals depending on the bond’s auction. Admittedly, these coupon payments fluctuate considering the rates are applied to the bond value.
4. Municipal Bond Funds
Municipal bonds, also known as muni bonds, are attractive investment destinations during the pandemic, albeit riskier. These funds enjoy tax exemptions on a federal level – and when issued by your state, investors are free from state taxes, too.
Such tax advantages accelerate the compound growth of the money you invest compared to a taxable account. When you buy muni bonds through an exchange-traded fund, you can reinvest the money derived from your bonds, enhancing compound growth.
Aside from federal and state tax legislation, municipal bonds don’t fluctuate as much as investing in the stock market. Muni bonds have a reputation for lower volatility, making them better assets for your savings.
The higher level of municipal bonds’ liquidity is another reason you should invest money in them during the pandemic. You can trade these bonds on a secondary market.
This liquidity is advantageous as your capital is accessible in emergencies (without a tax penalty) when you need a quick cash supply.
The three major municipal bond types are revenue bonds, special assessment bonds, and general obligation (GO) bonds. Most investors see GO bonds as the safest type of bond and are typically repaid on the issuer’s credit.
5. 529 College Savings Plan
The 529 plan – alternatively known as a qualified tuition plan – is designed to help a guardian save money for a family member or a child’s college education. American state authorities (educational bodies and state agencies) sponsor 529 plans.
In a 529 account, the investor can make his pick from investment options like cash investments, bonds, or investing in stocks. The majority of 529 plans offer you options based on the beneficiary’s age and your risk tolerance. This mirrors the assets you get in target-date funds in a 401 K.
529 plans are flexible and never expire as you can name a new beneficiary as you deem fit, saving such beneficiary from student loans. Therefore, in a situation when the designated beneficiary – say, your oldest child – doesn’t exhaust all the money in a 529 plan, you can name another beneficiary (a sibling) who assumes the account. Given that these accounts are imperishable, you can pass these funds down several generations.
Income tax breaks are another major win when you invest money in 529 saving plans. You don’t always get this when you invest money in your regular mutual funds.
These tax reliefs were aimed at incentivizing Americans to save money for the college education of their wards. These tax breaks became established fully in the Pension Protection Act of 2006.
While deductions are not allowed for contribution, earnings in a 529 can appreciate (being exempt from federal taxes) and will be untaxed when the money is pulled out for college education.
This is notable, considering how mutual funds are usually slapped with annual income taxes, which force the investor to give up a fraction of what they would earn. And that doesn’t even include capital gains taxes that the investors in mutual funds would have to pay when they withdraw.
Prepaid tuition plans and savings plans are the two basic types of 529 plans you can invest money in. Savings is the more prevalent 529 variant. Here you make monetary contributions to the 529 plan.
Such contributions are invested in selected mutual funds. Fund performance determines the appreciation of the account.
Not every American state (or even tertiary institution) offers you a prepaid tuition 529 plan. There are several adaptations of the prepaid plan, but they essentially allow the account holder to lock in tuition for the beneficiary – who would not be attending college anytime soon – at prevailing rates. Take note that K-12 education is excluded from prepaid 529 plans.
6. Cloud Infrastructure
Cloud infrastructure investments are a smart way to grow your wealth in the pandemic. Specifically, the pandemic amplified demand for cloud-based solutions, with the cloud industry enjoying massive growth within the third quarter of 2020.
For context, Amazon Web Services (AWS) Inc., one of the leading cloud providers, grew in 2020 Q3 by 29% to $11.60 billion when compared to the 2019 Q3. Another titan in the cloud industry, Microsoft Corp.’s Azure, enjoyed gains in the third quarter with an estimated year-over-year growth of 48% in the September quarter.
The need for ready data transfer and accessibility and real-time collaborations (including text, voice, and video calls) was mandatory for virtual offices to function optimally.
All these needs were satisfied by the cloud. Thanks to the cloud’s reliability, security, and scalability, 90% of companies are already on the cloud.
Such growth is not particular to the pandemic. Cloud infrastructure has always counted among the fastest growing sectors in the tech space. In 2019, Public Cloud Services recorded a revenue haul of $233 billion. Within the next 5-7 years, it is projected that it will pool $1 trillion in revenue.
What more, the digital economy’s adoption is on the rise, and with more technological innovations coming, we can only anticipate an accelerated expansion of cloud infrastructure. The IoT (internet of things) infrastructure is becoming robust thanks to an increasingly interconnected world.
Few suffered the economic impact of the pandemic as much as retailers with physical stores. A BDO USA report revealed that bankrupt retailers closed about 6,000 stores in 2020 due to the pandemic.
Forced shop closures and more emphasis on health forced shoppers online. An Adobe Digital Economy index report published in June 2020 showed that American e-commerce spending had shot up to $82.5 billion.
This was a 77% year-on-year leap. Furthermore, in the second quarter of last year, $1 in every $5 spent by US consumers was on online orders.
This expansion in e-commerce increased the need for retail technology. Retail technology is behind the seamlessness of the shopping experience you get online today. From Amazon Go’s automated checkout to Alibaba’s Hema QR codes to Audi’s VR showroom, retail technology has come to stay.
There is no better time to put money in retail tech than now. The pandemic has consolidated e-commerce, with online retail sales expected to rise above $740 billion in the United States alone by 2023.
Commodities are high-risk, high-reward investments, especially now in the pandemic. By commodities, we mean the likes of raw materials like oil, gas, coffee, and even orange juice.
At the height of the pandemic earlier on in 2020, agricultural commodity investments experienced a slump. Down through the year, though, agricultural commodities enjoyed a steady recovery. Such recovery is expected in 2021.
It is well known that oil prices fell heavily at the start of the pandemic. This has not been helped with the flurry of lockdowns. But the market is expected to overcome the initial shock and recover to pre-pandemic price levels. Massive vaccination campaigns would only increase this price recovery.
Specifically, projections show oil prices (per barrel) could rise up to $44 compared to the lows of $41 seen in 2020. Demand would steadily pick up as societies reopen and economic activities climb back to levels seen before the pandemic in 2019.
While you can directly buy the natural resources, it could be more convenient and scalable (especially considering security and storage needs) to invest money in companies based in the commodity industry.
9. Real Estate Investment Trusts (REITs)
With REITs, small investors can own shares in high worth real estate properties. REITs are companies that accrue capital from investors, invest this money in real estate properties, and then distribute the dividends (rent) among the shareholders.
In similarity to mutual funds, REIT investments ensure steady income generation, although the capital appreciation isn’t the largest you can get.
But REITs differ from physical real estate investments in that you can trade the former publicly on security exchanges like stocks. This enhances their liquidity as they can be easily converted to cash.
Indeed, at the start of the pandemic, REIT investments were affected. But they have been recovering steadily, making now the ideal time to put your money into these investments. Of course, at this point, REITs are riskier than normal, but the rewards are proportionately higher.
Aside from sustaining their dividends, REIT investments are expected to enjoy strong growth in 2021. The long-term nature of REIT reduces the impact of short-term fluctuation in interest rates and inflation compared to how responsive the equity stocks are to such variations.
Administrative expenditures and rental income for REITs are typically fixed and reoccurring. Hence, it is easier to predict REIT returns – whereas such predictability or sustainability may be lacking in equity stocks. All these contribute to reduced price volatility.
You can also resort to investing in REITs to diversify your portfolio in this pandemic. REITs display low correlation with the way most asset classes perform. This deviation from the likes of bonds and equity stocks means they hedge your other assets.
Characteristically, plummets in stock prices trigger better performance in REITs. With such behavior, you can better balance your portfolio.
10. Global Bond Funds
Global bond funds give you something more opportunities than a domestic bond portfolio. Here, you are financing a foreign government or company with loans for which you reap interest payments pending the bond’s maturation upon which you are paid the full principal.
Agreed, investing in these bonds is riskier than investing in American bonds (considering potential market and political instability), but most international bonds promise higher returns than US bonds.
Depending on your risk profile or investing needs, you could put your money into these bonds, get foreign market exposure, and tap into the expansion of high-growth emerging economies.
Undoubtedly, the pandemic’s impact on emerging markets has not been as severe as that on advanced economies (especially in the United States).
Some of these economies –even in the broader G20 markets – have enjoyed reasonable growth while others managed to keep their economies running, escaping the lockdowns that wreaked havoc on developed economies.
The reduced synchronization between global bond funds and developed economies makes the former an excellent means of diversifying your portfolio in the pandemic.
Aside from the pandemic, most of these emerging economies are deviating from the large-scale reliance on manufacturing as seen in developed economies of the world while directing emphasis towards amplifying local demand and consumption.
With all these, we expect global bond funds to appreciate as these developing economies accelerate their economic prosperity.
The pandemic has triggered massive hikes in gold prices. On August 4, 2020, the spot price for a gold ounce went above $2,000. By shooting past $1,800 per ounce, gold prices breached a significant resistance point it has not touched since 2011.
The truth is, gold has a history of rising during periods of volatility as normal when leading global economies are experiencing uncertainty. Since March 2020, gold counts among the best-performing investments as the pandemic rages, making it cool to put money here.
In 2020 alone, gold prices have enjoyed an increase of 26.73%. Because of lowered interest rates and world governments borrowing, more investors will run to safe-haven assets like gold.
Yes, gold prices are going up, and it is getting harder to determine when to buy. But experts recommend gold being an essential part of your portfolio as an alternative investment.
It is no longer a question of when to buy gold (as there is never a “best” time to buy gold), but more of how much gold investments you should have in your portfolio. The latest consolidation in gold prices could be an excellent entry point.
It is wise to assign up to 10% of your portfolio to gold investments. This could be in the form of procuring gold savings funds, buying gold exchange-traded funds, or investing in sovereign gold bonds.
12. Certificates of Deposit (CDs)
Certificates of deposit rank among the safest assets on this list. For a stated period of time, an investor derives a fixed interest rate on the capital they put into CDs.
CDs are alternative investment outlets for investors who can’t stomach the volatility of traditional bonds and can’t accommodate stock market investments’ riskiness.
CDs have a safety net in that they are protected by the Federal Deposit Insurance Corporation (depending on your financial institution) to a maximum amount.
Although high-yield CDs have a high entry capital requirement, they are worth investing in; when compared to a standard certificate of deposit, high-yield CDs promise higher returns. Aside from needing a higher minimum deposit than typical CDs, high yield CDs hold for lengthier periods.
You can also resort to CD laddering to enhance your yields. In this strategy, the investor slashes his allocated capital into several equal parts. These portions are invested in multiple CDs with varying dates of maturation. Via this approach, the investor lowers not only the reinvestment risk but also the interest rate.
For example, let us assume you have $20,000 purported for CDs. Instead of investing this $20k in one CD, you can slash it up into four investments of $5k each. You can now invest this money into CDs with maturity periods of 12 months, 24 months, 36 months, and 48 months.
13. Individual Retirement Accounts (IRA)
IRAs are retirement accounts designed to save taxes. Investments in IRA accounts are exempt from your taxable income. There is a spectrum of asset classes to put money in an IRA.
You can choose between investing in assets like stocks, bonds, annuities, and mutual funds. The amount of money you invest and the asset class determines the growth of your account.
Indeed, IRAs have limits for your yearly contribution. For 2020, the annual limit for people at least 50 years was $6,000. For 2021, it is $7,000.
You can open an IRA either with a broker, a robo-advisor, or at a bank. Robo-advisors help you manage your retirement account, doing the bulk of the work in identifying low-cost investment opportunities with befitting risk coefficients. Should you desire to handpick your investments yourself, you can go with an online broker.
Aside from annual contribution limits, withdrawal rules also hold for IRAs. Unless you are eligible for an exemption, any withdrawal when you are below 59.5 years attracts a tax bill and a 10% penalty. Any qualified withdrawals you make after crossing the 59.5 age limit are tax free.
The four most popular IRAs to invest money in include the traditional, SEP (Simplified Employee Pension), SIMPLE (Savings Incentive Match Plan for Employees Individual Retirement Accounts), and Roth.
In some cases, contributions to traditional IRAs attract taxes. For Roth IRAs, contributions are not tax-deductible. However, withdrawals you make from Roths are tax free.
Similarly, investment gains on your Roth are exempt from taxes too. Roths don’t have required minimum distributions (RMDs).
SEP IRAs are designed for self-employed individuals and small-scale entrepreneurs with only a handful of employees – or none at all. Contributions to SEP IRAs are tax-deductible.
Here, investments appreciate tax-deferred up to when you retire.
This is when distributions become taxable income. SIMPLE IRA is for business owners with lesser than 100 workers on their employee list. Contributions to SIMPLE IRAs are tax-deductible.
Considering that the money you invest in IRAs is designated for long-term appreciation, making contributions amid the economic turmoil sparked by the pandemic will bring the rewards ultimately.
Cryptocurrencies are digitally encrypted currencies that are decentralized. It was in 2009 that the first cryptocurrency –Bitcoin – was launched. Since those nascent days, cryptocurrencies have enjoyed huge adoption.
2020 was exceptional for most cryptocurrencies. Thanks to the gains recorded by three of the four biggest crypto tokens, the crypto industry rose to $913 billion in market value by January 3, 2021.
In almost 36 months, this is the first time we’ve seen the crypto asset class approach the $1 trillion landmark. The last highest point reached in total valuation for the crypto industry was far back in 2018.
Cryptocurrencies are gaining more trust and recognition from governments, individual investors, and major financial institutions.
Particularly, Bitcoin grew massively in 2020 – growth that is anticipated to spill into 2021. Across the last 12 months, Bitcoin wallets grew to more than 62 million wallets from 43 million wallets.
Bitcoin’s rise can’t be solely measured by wallet expansion. Major financial players like Paypal and Square have recognized the legitimacy of Bitcoin.
More people are purchasing Bitcoin via Square’s Cashapp. Cash App announced a $1.63 billion as their Bitcoin revenue, with a further $32 million in gross profit for the third quarter of last year. This is a 1000% year-on-year increase.
Such success on the part of Cash App has encouraged the likes of Bitcoin to accelerate their BTC adoption, with users now allowed to sell, buy, and hold other cryptocurrencies (aside from Bitcoin) like Litecoin and Ether.
Aside from Bitcoin, other exciting cryptocurrencies to invest funds in during the pandemic include Litecoin, Ethereum, and Ripple. Following Bitcoin, Ethererum is the second-largest cryptocurrency in the world.
Ethereum recorded similar gains in the pandemic. Across the last 12 months, Ethereum grew by 300%, with interest in decentralized finance (Defi) ramping up.
15. Foreign Exchange Market
The forex market is another place to invest in the pandemic. The forex market is not the safest option on the list and is more suited to investors with high risk tolerance. This said, investing in forex can be lucrative.
No thanks to the pandemic, the world’s leading economies have been agitated. This sense of uncertainty has translated into forex trading, resulting in high volatility and currency fluctuation levels.
Forced work from home orders combined with mass layoffs has led millions worldwide to resort to forex trading, resulting in gross trading volume and consequently high liquidities.
Data from IronFx reveals that Forex trading went up by 300% during the pandemic. IronFx (a forex broker) recorded a month-to-month growth running into 50% in new accounts opened. This translates into new 220,000 client accounts opened from March to June.
However, trading forex involves capitalizing on fluctuations in currency exchange values. Forex trading requires tact and sophistication. With a good combination of fundamental analysis (including macroeconomic data like market news and policy updates from major financial institutions) and technical analysis, an experienced trader can gain from the abundance of volatility currently seen in the forex market today.
You should be watching out for major fundamental data like US employment rates, inflation, and fed announcements as they are the major market movers in terms of influencing trading sentiment.
Aside from the technical details, investing money successfully in forex trader as an active day trader requires a lot of emotional resilience. This is due to the amount of nervousness currently flooding the market as the bulk of traders are in panic (feeding the volatility).
When you have open trades, you need the discipline to stay composed and calculated, sticking to your investment plan and avoiding the tendency to slump into emotional trading. Most of this is achieved by integrating risk management protocols in your trading.
When investing your money during COVID, you should be diligent in identifying a befitting asset class whose returns match your ambition, and its risk coefficient suits your risk tolerance.
Don’t be hasty; make sure to investigate all the options within your capital allocation. Also, you need to be observant, regularly searching for knowledge that appreciates your assets.
At Self Storage Investing, our focus is consolidating your financial independence via strategic investments in high-growth self-storage assets. We want to help you prosper and reach your financial goals without having to sink all of your time or energy into the investment. We do it the easy, wise, and lucrative way. Reach out to us today, and let us discuss your options for earning your dream income.