My Coronavirus Investment Strategy

How to invest during Coronavirus

My Coronavirus (Covid-19) Investing Strategy For Peer to Peer Lending and the Stock Market

** Updated April 14th, 2020 **

On January 1st, 2020, if you’d have told me the world would be in disarray and a global economic crisis would take place in a matter of weeks, I would have scoffed.

And yet here we are. The Coronavirus is affecting each and every one of us and in some ways, this virus has made all humans equal. Every single person in every country faces the same economic and health risks.

All businesses are facing severe pressures, even businesses you might not think are at risk. Take hospitals for instance. You’d be excused for thinking hospitals should be economically sound in times of a pandemic but many hospitals will face economic problems by way of lack of funding. In the USA, hospitals will see defaults from insurance companies and patients being unable to pay for their treatment. Heartbreaking stories are surfacing about Covid-19 patients dying because they refused treatment because of a lack of financial resources.

The travel business is being decimated. Airlines are grounding their fleets and laying off employees and cruise ships are docked indefinitely. The entire city of Las Vegas has shut down, as has Disney World and all the world’s major theme parks.

American Movie theatre giant AMC is reportedly in talks to hire a bankruptcy law firm. Small businesses such as restaurants and bars face closures. I have been seeing the effect on my own business suffer as Financial Thing’s advertising and affiliate revenues have drastically fallen compared to one year ago.

When I began to watch the Coronavirus situation unfold, I didn’t take it seriously. I thought is to be another SARS scare. Then in mid-March as the virus rapidly spread, I thought we were headed towards a financial crisis akin to 2008. Now I believe this situation is similar to the American Great Depression of the 1930’s.

The only way out of this economic mess is for the governments to print money and offer business financing. The big question is, how on earth will this debt ever be repaid? Is this debt compounding an even bigger problem that was masked by the illusions of a decade long prospering world economy? Likely so but that’s a topic for another time.

As dire as this situation is, and make no mistake about it, it is dire, there are some positives.

The world is being reset and with resets comes innovation. Many companies will turn this crisis into opportunity even though the way out doesn’t seem clear now. People will have the chance to come together to help one another. New business opportunities will emerge and people will generally be more prepared.

Many people and businesses with little to no financial cushion will be forced to look at their spending, saving and debt habits. This crisis made me realise how essential having a six-month cash emergency fund is.

In the midst of the Coronavirus, stock markets are experiencing some bipolar activity with severe up and down swings unseen since the days of the 1987 USA stock market crash. One might be forgiven for thinking the Coronavirus recovery is underway but I’m starting to believe the markets are not representative of the economy and that more downward swings are coming.

I’m sure you’re wondering what to do with your investments. Should you sell your stocks? Should be keep a lot of cash or buy gold? Are your peer to peer investments safe? How this crisis will affect investments in the sort and long term?

Here are my opinions on economic outlooks, peer to peer lending and stock market strategies during these uncertain times.

It’s important to remember that eventually, this too shall pass.

Economic Outlook

If the virus lingers, I’m concerned about SME’s (small and medium-sized businesses). Businesses such as restaurants, hotels, travel, services, and retail will inevitably suffer. The governments are offering these businesses loans, but how will these loans be repaid?

Businesses are temporarily closing leading to employee layoffs and this will have a run-on effect on peoples’ ability to make mortgage payments which will affect the property and rental market. When people aren’t working, they stop spending and this creates a ripple effect.

The good news is that world economies simply can’t survive by closing down indefinitely and governments know this. Governments will have to quickly find a balance between shutdowns and maintaining economic health. This will be achieved with large stimulus packages such as the US Fed purchasing corporate bond ETF’s to pump money and liquidity into the markets for people who want to sell their ETF’s. Eventually, there will need to be a loosening of the lockdowns and quarantining.

Once the Cornavirus concern subsides and the virus is contained, I believe world economies will thrive as stimulus packages will have pumped trillions into world economies. But how long this recovery will take is unknown.

Peer to Peer Lending Strategy

I believe the peer to peer lending sector is one that will continue to innovate and thrive, simply because this form of lending solves two problems in one solution. Peer to peer lending gives investors returns that are better than bank savings rates and provides fast financing to businesses. The biggest question surrounding peer to peer lending continues to be which companies are reputable and which can survive long-term. The Coronavirus crisis might provide these answers.

I’m still holding my peer to peer lending investments while rebalancing into the companies I view as having long-term sustainability. This isn’t always easy to estimate as I don’t have access to peer to peer companies current financial balance sheets.

Peer to peer lending does have some advantages during economic downturns. Peer to lending can:

  • pay returns that are higher than bank savings rates
  • offer businesses financing that they would be unable to obtain from banks
  • offer more capital protection than the volatile stock markets

During this time of uncertainty, I’ve been continuing to withdraw any interest and capital repayments and have in some cases, reducing my investments where possible. But this for me is a short-term move as I don’t see anything wrong with sitting on the peer to peer sidelines for now. There’s no need to take unnecessary risks.

My Top 5 Peer to Peer lending list has changed, so please check it regularly as markets change.

Many peer to peer lending companies have made swift changes to combat economic uncertainty. These changes include furloughing employees, freezing new loan issuance and investor sign-ups.

If I were able to rebalance my peer to peer lending portfolio today, I’d be investing through well-funded peer to peer companies that have strong business fundamentals and the ability to ride out this financial storm. Some peer to peer lending companies have low expenses with small teams (Loanpad) or are funded by larger operations (Octopus Choice and Lendinvest). Octopus has healthcare and energy businesses that may thrive during difficult economic times.

Another peer to peer company that may benefit from tougher economic times is Unbolted which loans money against easily recoverable items such as gold and jewelry. When times are tough, people pawn valuables to access money quickly.

So what about the property-backed loans that peer to peer lending companies offer? I consider UK property to be generally sound. Having said that, if this virus is long-term, property-backed peer to peer loan companies may experience increased borrower late payments and defaults. If homes cease to sell, then developers will be sitting on inventory for longer than usual which can increase economic strain. The peer to peer companies that are loaning at conservative loan-to-values would be a safer bet. Property backed peer to peer companies such as Loanpad, Blend Network, Property Crowd, Proplend, and Crowd Property have emphasised the importance of risk assessment and risk reduction when looking at deals.

I’m hopeful that the larger peer to peer lending companies such as Ratesetter and Assetz Capital have underwritten quality loans that will remain current. The issue is if the virus lingers for a period of months, some consumers and everything from small to huge companies will not be able to make debt payments. This is why we need the virus to pass quickly.

Don’t be alarmed to see more peer to peer companies freezing or slowing exit withdrawal requests. Exit liquidity requires not only sellers but buyers. When everyone is attempting to withdraw from their peer to peer lending investments at once, naturally there won’t be enough buyers, hence the lack of exit liquidity. I expected this to happen during any financial crisis.

While we have no information about companies’ financial health, these freezes don’t necessarily mean the peer to peer companies are in financial trouble.

Remember peer to peer companies never guarantee investors a way to exit.

Peer to peer lending has its own risks that differ from the stock market so be sure to understand these risks.

The Stock Market

“Someone’s sitting in the shade today because someone planted a tree a long time ago”.

– Warren Buffet

I recently received an email from a reader who was upset their index tracker had fallen in value. The reader called me some choice words for suggesting they buy index trackers. I’m not surprised by this reaction. Anyone uninformed who is investing in index trackers, not thinking long-term might have a similar reaction.

I’m sure you are wondering what to do with your investments? Let me try to be a calming voice in a time of uncertainty. I’ve always purchased index tracker funds with a very long term outlook (15 year+) and I’ve purchased more index trackers as the markets fell. I have cash sitting in an account ready to buy more.

I buy index trackers rather than ETF’s because ETF’s are traded on markets like stocks and their valuations can differ to the index tracker funds which have identical holdings. ETF valuations are complicated and come from a mix of company data, IIV (intraday indicative value), NAV (net asset value), premiums and discounts, cash and estimated cash, demand and supply, and third-party valuations. Sometimes the companies that offer the ETF’s have a difficult time valuing the ETF’s int he short-term.

Index trackers are valued once per day and execution times are longer for transactions. I actually like this feature because I’m less likely to try market timing when I know I can’t move in and out of index funds like I can an ETF or a stock.

While I have no crystal ball for the future, everything is temporary. Let’s look at some of the historical stock market swings that we have survived and thrived through.

Dow Jones

1932: Year close: 59.93
1937: Year close: 120.85
1987: Year close: 1,938
1991: Year close: 3168
2002: Year close: 8,341
2005: Year close: 10,717
2008: Year close 8,776
2011: Year close: 12,217
2019: Year close: 28,538

As you can see, every major financial crisis has been temporary and the Dow Jones has rebounded. I estimate a recovery after the Corona Virus crisis to be no different.

When the markets fall based on fear, buying opportunities are everywhere. In fact, this stock market fall may present a once in a lifetime opportunity. When people are selling, I’m buying. People who panic sell stocks are making emotional decisions. Smart investment decisions are made logically.

While I hate the impact the Coronavirus is having on people, I love it when stock markets correct because when prices fall, it means tracker shares are cheaper and when markets rebound, they should be more valuable long-term.

I’m still buying my favourite Vanguard US Equity Index Tracker (VTSAX is the USA version). I use Vanguard’s Global Bond Index Fund for less volatility and as a hedge for stock market corrections. Bond funds can be a better choice than cash long-term as they protect against inflation. You can read more about why I buy these two funds here.

There are some naysayers of bond index trackers but between February 24th, 2020 and March 24th, 2020, my favourite Vanguard equity index tracker dropped -20.8% from £540.44p to £427.59p (chart here), while my favourite Vanguard bond index tracker only dropped -3.06% from £161.85 to £156.89 (chart here). In many cases when equities are suffering, bond index funds can remain level or even appreciate in value, depending on interest rates.

For those wondering if managed robo-investment tools are better performers during stock market corrections, I have a test Wealthsimple account. This account has lost -22% during February 24th, 2020 and March 24th, 2020. So no, robo investment tools aren’t better than index tracker funds. My account balance is very small (less than £500), if it were higher, my account would have lost more money due to the fees.

I believe that the U.S. stock markets aren’t painting the real picture of the economy. It makes no sense that Carnival Cruise Line stock has risen 41% in four days when their ships are full of infected Covid-19 patients and their entire fleet is being docked for the next few months resulting in close to zero future revenues:

Too much money is being pumped into the US stock markets by the Federal Government. The real economic effects of the Coronavirus aren’t yet known because companies haven’t reported their losses.

Despite these factors, I still like index trackers which I view to be very long-term investments. If you buy index trackers for short-term purposes (less than five years), you are gambling. If you bought trackers in February 2020 and are panicking because you have seen their values fall, stop panicking and stop checking your account. I believe the prices will rebound as they always historically have.

If you are trying to time the stock market to buy in at a low point, you won’t succeed through anything other than blind luck because no one knows where the bottom lies.

So why not buy individual shares? Many amateur investors are trying their hand at stock picking during the Covid-19 crisis. You could, for example, go all-in on a company that manufactures ventilators. It sounds like a good idea until you consider what happens when the virus passes and the company has a massive overstock of ventilators it can’t sell. Plus oftentimes, share price already has such factors priced in.

I don’t purchase individual stocks because if those stocks fall 30%, it’s hard not to want to sell them based on the “what if they fall further?” mentality.

For example, as of March 2020, if you purchased International Consolidated Airlines Group (IAG:LN), which contains companies such as British Airways, the share price was down almost 70%.

The last individual stock I bought years ago was Apple with a buy and never sell strategy. I bought Apple because I like their products and every time I walk past an Apple store it’s full of people. This is hardly a sound stock buying strategy.

For me buying individual stocks is simply too risky. Remember Kodak, the company who invented the digital camera? Who would thought Kodak stock price would fall so low:


Index trackers buy the entire broad market and can be used as a long-term wealth-building strategy.

Remember, you only lose money in the stock market when you sell.

Cash Is King? Not Likely

In the short term, having access to cash is essential. I’ve always written about the importance of having a three to six-month cash emergency fund to cover your expense. But long-term, stashing large amounts of cash through fear is probably the worst of all investments. In the era of nonexistent interest rates, your cash becomes less valuable every month as the cost of goods and services rise. Eventually, inflation will eat your cash alive.

I’d prefer to hold a government bond fund over cash because at least the bond fund has a chance to appreciate as it pays a dividend.


In general, gold is a poor investment that requires massive amounts of timing luck to profit. If you look at a general gold chart, you can see the volatility. The problem with gold is, just like stocks, if you buy at the wrong times, your returns can be dismal:


If you purchased gold in January 1980, you would have paid $2,249 per ounce. In September of 2018, the gold price was $1,209 per ounce.

What I think gold can be used for is diversification which is essential during these uncertain economic times. Investing in a few gold coins to hold alongside cash, stocks, index trackers, peer to peer lending and property would provide some extra diversification in an investment portfolio.

In Conclusion – Stay the Course

This phrase has been an important reminder for me during my investing journey. I have to remember that everything is temporary and that these tough economic times will pass. Nearly every time I’ve tried to market time my investments, I’ve gotten the timing wrong. I tend to sell when the prices are falling and buy when the prices are rising, never knowing where these tops and bottoms are. So now I just stay the course.

For peer to peer lending, I have no power to see the future, but I believe the industry is here to stay. My hope is that this financial crisis will weed out the bad peer to peer lending companies and allow the quality companies to thrive. Building customer confidence will be essential for the strong peer to peer companies future. Surviving this economic downturn should be a great way for these companies to build this trust and confidence with investors.

As far as the stock market goes, corrections are good for long term investors, especially if you have extra money to invest. When prices fall, you can buy more index funds for less and when the markets rebound which they always have, you’ll be very happy.

I will use cash and gold can be used as part of a healthy diversified investment portfolio. I won’t hold too much cash long-term as inflation will eat up cash and I would only use gold for diversity, not as an investment.

I wish everyone good health and remember, this too shall pass.

– Laurence

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** This page is for information purposes only. This information is not financial advice and has been prepared without taking your objectives, financial situation or needs into account. You should consider its appropriateness for your circumstances. All investing carries risks. Opinions expressed in this review are opinions based on my own personal experiences. The FSCS does not cover peer to peer lending and your capital is at risk. Please don’t invest more than you can afford to lose. **