We wouldn’t blame first-time investors for being spooked by the stock market carnage of recent weeks. For those with or without experience of investing, these are extraordinary times. The Covid-19 pandemic has shaken the global economy to its core, shutting down swathes of activity and pulverising stock markets.
While markets may appear unapproachable right now, and it seems hard to look past the lockdown, investment is about the long term. And markets have a habit of surviving. First-timers just starting to think about investing to build a pension are in the best place to benefit from the challenges.
Questions from first-time investors:
If markets are falling, why shouldn’t I move my money somewhere safer?
Why would I want to invest now when the stock market is so much more fragile than it was a few months ago?
When does the FTSE bottom out and how do I make a killing out of Covid-19?
Those who have entered the markets at some point in the last 10 years will be enduring their first major crash and the temptation might be to get out now and never go back. But sell-offs are a natural part of market behaviour. Indeed, they can provide huge opportunities for those with a steady head. Instead of scarpering, history suggests holding your nerve is likely to pay off, and for those who haven't yet made their first investment now might be a once-in-a-lifetime opportunity to get started.
Click on the links below for our best free guidance for getting investing in tough times.
Getting investing can be nerve wracking in the best of times. This article aims to answer your key questions about investing during sell-off. Plus, five tips for buying the bounce and making your money go further.
In times of immense volatility, it might be hard to remember that markets go up as well as down. This overview of market behaviour should remind investors that markets have endured crashes and bear markets before. History can teach us a lot about investing in turbulent times.
“I’m old enough to remember being told in October 1987 that the long bull market in equities was over, and in the early 90s that house prices would never rise again. Such pessimism was of course wildly wrong,” writes Chris Dillow. Become a subscriber to find out how he has found plenty of reasons to be cheerful amid the current carnage.
Picking the right assets:
So, I’ve decided to take the plunge and begin investing, should I buy funds or individual stocks during the coronavirus crisis?
Are safe havens really safe?
What is happening to the price of various assets and why?
Picking the right assets can be difficult in the best of times, the added weight of a deadly virus certainly doesn’t make it any easier.
Funds are generally the best place for investors to get going in the market. They help to diversify a portfolio and are cheaper to buy than individual shares. But, it is very important to understand what you are buying – research into the underlying holdings of funds is important at all times, but crucial when markets are volatile.
The links below offer can help you pick your investments:
Investment trusts are a great way of getting going in the market. These act like funds in that they pool investors’ money together and a fund manager picks the companies to invest in, but unlike funds they are listed on the stock market. This screen can help you pick some good value investment trusts amid the carnage.
During times of severe volatility, poor choices can exacerbate losses, which is why it is crucial to follow a simple set of rules. This article will help you navigate the current challenges and look for funds which might benefit from the bounce-back.
Picking the right stocks
Is now a good time to buy dividend stocks or are companies likely to start cutting pay-outs?
Which sectors stand the best chance of a quick recovery once the tide starts to turn?
Should I invest in companies because I know and use them?
Investing can be complicated when you are first starting out, so first-time investors might be tempted to pick stocks they're familar with. But, it is important to note that there are many other factors behind stock picking, which could make this a disastrous investment strategy.
Companies are affected by a wide array of factors, so even if a company seems successful to you as a consumer, it may not be a good investment. Look at Aston Martin: a beacon of quality in the eyes of its consumers, but riddled with debt and incapable of delivering much for its investors. Picking stocks requires careful analysis, which is why it can be better to choose an investment fund or trust when you’re just starting out.
Dividend cuts are coming thick and fast. Stockbroker AJ Bell reckons around £30bn of dividends might have been cut or suspended by the end of the year. That assumes four months of disruption, which could be optimistic. Given the enormous hits to cash flow and revenues, it’s getting harder to say what constitutes a ‘dividend stock’.
The articles below can help you pick the most reliable investments to help you profit from the bounce (when it finally arrives).
Chris Dillow compares the fortunes of Games Workshop and WeWork and questions why the most important questions are not necessarily the most interesting in investing.
It’s an undeniable painful time for income investors. But if investors can navigate the market’s liquidity issues, we think there are bargains to be had. This article can help you hunt for safe(ish) dividends.
“This stock has been one of the star performers of the bull market in technology shares. It has also proved very resilient in the ongoing downturn. I take a closer look at what has made it such a good investment in recent years and what the future might bring,” writes Phil Oakley. Become a subscriber to find out which company he is talking about and why it might just be the most reliable investment in turbulent times.
My house deposit savings have been hammered and I’m looking at many more years of renting. What is happening to the renting market?
Young investors who may have been saving for a house using a stocks and shares Lifetime ISA will have seen those savings shattered as the stock markets have crashed in the last few weeks. A property market in freefall and uncertainty surrounding mortgages won’t help to ease concerns.
We hope our growing suite of property content can help. Click on the links below to find out what is happening in the property market:
NB. Remember, investing is for the long-term, if you’re planning on buying a house within the next five years, you probably shouldn’t have your savings in the stock market.
Private tenants are expected to be disproportionately hit by job losses and reductions in their working hours, in addition to financial hardship triggered by illness. But government intervention is helping to ease the pressure on renters and their landlords. This article explains the situation in more detail and identifies wider challenges facing the property market.
New investors - we want to hear from you. If you have any questions about managing your money during the coronavirus-crisis, get in touch and we will try to help. And remember to follow us on Twitter to keep up to date with all our latest articles.