The ethics of investing during a crisis

Investing during this time might seem like a selfish act, but it can actually be a great way to support the economy

836x222_handofmedicine_P_D.jpg

We’re living in an entirely unprecedented time. Not since wartime have we seen such a period of danger and concern for our communities and the vulnerable people within them, nor have we seen such stringent rules in place to help protect them. Right now, everyone is worried about their health and the wellbeing of those close to them, and so many people are pitching in to do their bit and to help look after each other.

Due to the uncertainty that’s continuing to wreak havoc around the globe, we’ve also seen the stock markets take a severe hit. Companies can’t make sales to bring in revenues and, understandably, anxious investors are selling their investments to provide some much-needed cash. No doubt everyone is sick of constantly hearing how the FTSE has risen or fallen over the past twenty-four hours, too.

Amongst the stories of people selling their shares, there’s also been a lot of talk about buying in a market as volatile as this one whilst prices are so low. In fact, billionaire investor Warren Buffett is often quoted as saying “Be fearful when others are greedy, and be greedy when others are fearful.” There’s a callousness in his guidance, with many people feeling that it’s morally objectionable to profit when the world is in turmoil. However, as paradoxical as it may seem, investing in the market right now is not only morally acceptable, but actually recommendable.

Helping the economy

There’s been a huge effort to help the vulnerable and needy at this time, from large contributions like Pep Guardiola pledging €1 million to coronavirus-fighting causes in Spain, to the simple and heart-warming, like a local flower shop putting all its wares out for anyone to take. However, another big contribution you can make is by personally investing.

It seems counter-intuitive but, by buying shares, you can begin making sure the market will recover when the crisis begins to wind down. Providing capital into the market and to businesses could be a key factor in some of these smaller companies surviving whilst trading is almost entirely suspended.

Like it or loathe it, the health of everyone during this crisis does depend on the health of economy. A continued recovery for both depends on people who can afford to keep it ticking over.

Helping you

Many predictions have been made over how the economy will look in twelve to eighteen months, but unfortunately none of us can predict exactly when the markets will recover. It’s quite likely that we haven’t yet seen the bottom of the market and that the current volatility will undoubtedly remain for some time. But history tells us that no matter how despairing the markets currently appear, the recovery will come eventually. Many of us clearly remember the Great Financial Crisis of 2007-2008. The market sell-off that followed the collapse of Lehman Brothers threatened the entire banking system, causing despair for investors globally. And yet, the markets began to rise again in 2009, going on to record the longest bull run in history.

Whilst we’re in no way suggesting another bull run is definitely around the corner, history would suggest that by investing now, you could benefit from the market upswing that could likely come about as the impacts of the virus begin to fade away.

However, as previously mentioned, volatility is likely to continue, which makes it very difficult to time the bottom of the market. Therefore, it’s advisable to avoid making one large cash investment and instead take the little and often approach. This will allow you to buy more shares at the lower price and less at the high, therefore reducing your potential for loss.

Seeing a purchase in the market right now as a selfish act is an understandable view; there’s undoubtedly a self-interested component to any investment, especially as prudent investments now could make a tidy profit in the future thanks to the current low markets. But in this case, when you profit, society will too, as it means the market will have risen from the depths, and this period of difficulty will be behind us.

If you decide to buy in this market, don’t forget the rules of investing at any time still apply: remember that investments can fall as well as rise, diversify your portfolio with a range of investments, and never invest more than you can afford to lose.

Most importantly, whether you decide to invest or not, make sure you continue to follow government advice over the virus, and stay safe and healthy during this time.


All information given including prices, yields and our opinion is correct at the time of publication. Our opinions on investments can change at any time and for our latest view please go to www.share.com. To understand how our Investment research team arrive at their views please read our Investment Research Policy.

 
See what else we have to say