POST-LOCKDOWN PREDICTIONS FOR THE ECONOMY: TIPS FOR INVESTORS

Speaking back in April, economist Gertjan Vlieghe from the Bank of England broke the bad news that we knew was coming;

We are experiencing an economic contraction that is faster and deeper than anything we have seen in the past century, or possibly several centuries.”

Since then, businesses have struggled to stay afloat, the FTSE 100 has fallen by 24% over three months and without a vaccine or cure for the virus, the future remains uncertain.

With this in mind, what should you do about your investments? Is now the perfect time to invest or should you cut your losses and sell?

Let’s find out.

 

Imogen Clarke

Stick to your long-term plan

Despite how concerned you might feel right now, the worst thing you can do is pull your money out of your investments. Ride out the storm and you are more than likely to see the market recover and your money grow in value once again.

“The best course of action is for investors to be disciplined, and approach any investing in a normal systematic way, no matter how nerve-racking it might currently feel,” agrees Julian Broom, Chief Investment Officer at The Fry Group.

You see, the stock market has always been volatile. Markets can grow and decline at a rapid pace. The good news for you as an investor is that after all the previous market crashes seen in the past 100 years, the market has grown again.

So stick to your long-term investment plan as before and have faith.

 

Drip feed your investments

Now is the perfect time to invest in the stock market as the prices are so low. However, it’s impossible for anyone to predict if markets have already hit the bottom or if they’ll drop further as we emerge from the lockdown.

Therefore, with such unstable markets, it’s important to take a ‘slowly, slowly’ approach and invest a small amount every month.

This will allow you to buy more units when prices are low and fewer when prices are high, so you can ride out the volatility.

 

Look for quality when you buy

Many new investors look for the cheapest stocks when prices are low this like and presume that it means they’ll have guaranteed growth when the markets pick up again.

Unfortunately, it’s not quite this straightforward.

The world economy has been shaken to its core over the last few months and consumer behaviour has changed beyond all recognition.

Even top-performing businesses and industries like Rolls-Royce, Airbus, Virgin Atlantic and EasyJet have been impacted and have struggled under the additional financial pressure.

Therefore, before making any new investments, check that the business in question wasn’t already in debt before the coronavirus hit.

“Investors should look for underlying quality before investing,” agrees UK investment media group, Investors Chronicle, “That also means assessing the individual holdings in a fund before buying it and avoiding those that are full of low-quality companies.”

 

Don’t rely on cash

You might find yourself wishing that you had stuck to lower-risk cash savings at times of crisis like these. However, cash certainly isn’t as safe at it seems.

The current UK base rate is a paltry 0.1%, which is lower than ever before in history. This means you’re getting close to zero return if you have your money in savings, so it’s not helping you to build a more solid financial future.

On top of that, the UK rate of inflation stands at 1.19% which is less than the base interest rate. This means that the value of your cash is actually falling if you have it in savings.

Even though the fluctuations of the market might make investment seem nerve-racking, it’s a better choice over the medium term than cash.

Review your portfolio

It’s a great time to review your portfolio and make sure your investments are diverse enough to help you protect your money whilst also reflecting your attitude to risk.

Review your goals, consider your current financial situation and consider how you could make improvements.

  • Have your investments provided the average returns you or your financial planner predicted?
  • Could you allocate more of your cash reserve to an ISA, pension or other investment packages?
  • Could you diversify across different markets?
  • Could you switch your investments more towards new and growing markets such as gaming, digital communication and digital learning?

 

Summary

Although the market has been hard hit by the coronavirus, the future is bright when it comes to investing.

Stick to your long-term plan, review your allocations, and drip feed your investments and you are highly likely to see your investments grow again.

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