Market crashes provide opportunities, especially for those who don’t have pressing financial concerns.
In the wake of the 1987 stock market crash, Warren Buffett said: “Be fearful when others are greedy and greedy when others are fearful.” That lesson has resonated throughout the major sell-offs since 1987: the dotcom bust, the housing market financial crisis in 2008 and the Brexit referendum sell-off.
The coronavirus presents a new set of challenges for stock market investors, but the lessons from sell-off history remain the same. Buying the bounce can be very fruitful as long as investors maintain a level head.
Key questions from bounce-buyers
How sure can we be of a bounce back?
If the markets are still falling, why not just wait to buy at the bottom?
Should I invest as much as possible now?
2020 is not going well for investors. The pain is cutting especially deep as it has been so long since the stock market took a tumble of this scale. The temptation might be to get out now and never come back. But history suggests holding your nerve is likely to pay off.
The articles below explain why the markets are likely to bounce back and how you can profit from that.
Stock markets rise and fall, driven by the demands of the investors who buy and sell its assets. And those investors are a predictable bunch, which means that stock markets behave in predictable ways. A look back into history is therefore very reassuring.
History can also help us understand how long the pain will last. Mark Robinson has looked at the duration of previous bear markets in his recent Taking Stock column.
“I’m old enough to remember being told in October 1987 that the long bull market in equities was over, and in the early 1990s 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.
The answers to the key questions for those attempting to buy the bounce and fives tips to show you how.
Putting more into the stock market while the country is on the brink of a national health crisis and the economy is on lockdown may, understandably, feel like the last thing you want to do. But by investing regularly, such as once a month, in volatile markets you should benefit when the markets recover. This article explains why and shows you how.
Picking your investments:
Which shares look decent value?
Which companies will bounce back quickly?
Is now a good time to buy dividend stocks or are companies likely to start cutting payouts?
Are investment trusts really good value?
Cash has always been a vital metric for investors to look for when picking shares, but never has it been quite so important as it is in the heart of the coronavirus pandemic. Investors looking for stocks that have plummeted in the last few weeks should assess for security and quality before leaping back in.
Cash is also crucial for assessing the likelihood of a company cutting its dividend. Right now, the 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).
The US giant has enough cash reserves to cover almost two years of operating costs. Surely that makes it one of the most reliable picks amid the volatility? Phil Oakley runs through the investment case in this article.
The best of the FTSE. This list of shares might still have further to fall as the market remains volatile, but be ready to buy when the price is right.
Simon Thompson has scanned the small-cap space for companies that look much better value than they did a few weeks ago.
Hunting for bargains in the current environment could prove a treacherous business, as well as a potentially profitable one. Algy Hall's stock screen hunts for shares that have never been as cheap as they are now.
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.
The coronavirus pandemic has been disastrous for income investors. Falling asset prices make it a dangerous time to take money from your portfolio and interest rate cuts have restricted yields available. The tendency of investment trust shares to sell off heavily at times of market volatility means that some equity income trusts can be picked up cheaply. This article helps to identify some investment trusts that could ease the pain of company dividend cuts.