The Motley Fool | Jul 07, 2020 08:40
Several months have passed since the rather unexpected market crash in global stock markets. Many shares have recovered part of their losses. But the decline still means the bull market we’ve had over the past decade is now over.
Year-to-date, the FTSE 100 and FTSE 250 are down about 19% and 21%, respectively. Put another way, both indexes are flirting with bear market territory — a fact that is likely to make investors nervous and even panic. Yet today, I’d like to discuss why this market crash presents a great investment opportunity in solid FTSE 100 shares for many people, especially those who have a longer time frame.
FTSE 100 shares — the comeback kid The most famous index in the UK is the FTSE 100, which began in 1984. Most companies in the index are multinational conglomerates. In addition, the FTSE 250 index consists of the 101st to the 350th largest companies listed on the LSE. It was launched in 1992. Companies in it usually have a more domestic focus.
Over the past several decades, there have been many market crashes, economic downturns or political uncertainties that have adversely affected share prices. Yet within several months, our economy and the indexes have always turned around. Many stocks have ended up making a new high within several years.
Scholars will possibly study the current period in history for some time to come. The full health and economic effects of the Covid-19 pandemic are still unclear. The rapidity of the market crash has been unprecedented.
However, as retail investors, we should stop worrying about the daily volatility in the markets. After all, most people have other ‘life issues’ on their minds besides FTSE 100 shares. We work some and also spend time with our loved ones. Instead of worrying, we need to invest a part of our income regularly irrespective of what happens in the markets on a given day. Because after some months, equity markets typically recover.
Why I’d diversify across sectors What would you rate as one of the most reliable safeguards against stomach-churning market volatility in the stock market? I would say ‘diversification’ within your share portfolio.
For example, let us assume you had invested £1,000, 10 years ago, in July 2010, in several FTSE 100 and FTSE 250 shares. Below, I’d like to show you how much your investment would be worth now, based on a buy-and-hold strategy and share price appreciation:
Many shares recovered from their lows after the Great Recession years of 2008/09 in a matter of a few years. Before too long, share prices of stable companies will likely recover once again.
July might be a good month for you to revisit your stock holdings to see which stocks should be in your portfolio following the recent market crash. A share portfolio constructed of different kinds of companies and sectors will, on average, yield higher returns and enable you to ride out the volatility of the market.
The post Here’s why I’d stay invested in FTSE 100 shares even after the worst stock market crash in a decade appeared first on The Motley Fool UK.
tezcang has no position in any of the shares mentioned. The Motley Fool UK has recommended Halma. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2020
Written By: The Motley Fool
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
Get free real time quotes, charts and alerts on stocks, indices, currencies, commodities and bonds. Get free top of the line technical analysis/predictors.
More content, faster quotes and charts, and a smoother experience is available only on the App.