Investing during Covid-19

In the industry, we refer to all the media investment hype as ‘noise’. It is easy to get distracted with constant negative headlines and often forget that stock market investing is a long-term roller coaster. It’s important to stick to your long-term plan and block out the short-term fluctuations (the ‘noise’). Buying into a fund or portfolio is not designed to make you instantly rich, but the effects of long-term compounded investment growth will help you considerably.

For those not familiar with the concept of ‘compounding’, its best explained with an example: You invest £1,000 which gets 5% growth per year. After 1 year, the value is £1,050. Year two, you get 5% growth on £1,050 which totals £1,102.50. By the end of year 10, the initial £1,000 would be worth £1,628. This is an increase of 62.8%.

It’s important to note that investment returns are not guaranteed. The above example is not realistic in the sense that there are no investments which offer a guaranteed 5% return, however it is realistic that an average of 5% per year, over a long period, could be achieved by a ‘moderate’ risk investment.

There is no shying away that Covid-19 has hammered the stock markets recently. Between the 21st February and 23rd March, the FTSE 100 dropped an eyewatering 32.5% from 7,403 points to 4,993. However, what mainstream media fails to report, as good news investment stories don’t sell, is that the following month, up until the 23rd of April, it increased by an impressive 14.2% back up to 5,821 points. This pattern is typical of all major global markets recently.

The truth is that no one can predict which way the markets will go next, but a quick look at history will tell you that markets are resilient and tend to bounce back pretty quickly, as they did following the 2008 global financial crisis. This of course cannot be guaranteed.

My message here is not to panic. Ignore the ‘noise’ and stick to your original long-term plan. If you are already invested, the worst thing you can do now is to sell, as all you would be doing is confirming your loss. If you are new to investing, the current climate combined with all-time low interest rates might represent an opportune moment to dip your toe in for the first time.

I’ll finish with a passage from Robert Kiyosaki’s best-selling ‘Rich Dad Poor Dad’:

Overcoming cynicism

‘Whether it’s our own self-doubt or the doubts of other people in our lives, often we allow that doubt to keep us from acting. We play it safe, and let opportunities pass us by.

It often takes great courage to not let rumours and talk of doom and gloom affect your doubts and fears. But a savvy investor knows that the seemingly worst of times is actually the best of times to make money. When everyone else is too afraid to act, they pull the trigger and are rewarded.’

I appreciate your honesty! So you are aware, Financial Advisers are not regulated to recommend buying/selling direct shares.

Oil stocks nosedived last week making front page news. It goes back to the idea of buying cheap at the seemingly worst of times.

There are several direct to consumer trading platforms out there to facilitate it yourself. To name a few; Hargreaves Lansdown, Charles Stanley, Saxo Markets. A typical trading charge will vary from around £8-£15 per trade.

Providing you have remaining ISA allowance, it would be worth doing via a stocks and shares ISA so that any growth is free of capital gains tax upon sale.

Hi Cryst, I heard of IWEB but never used. It is part of Halifax. Personally I use Hargreaves Lansdown as I like their research tools and they have excellent customer service. However, trading is more expensive starting at £11.95 per trade.

As I'm sure you are aware, buying direct shares is considered high risk as it lacks diversity. For a new investor, buying into a collective fund would be a safer starting point as it can be spread across various sectors, regions and asset classes.

Which I agree would be sensible but I was more considering the fact ascpfc had a couple hundred quid. Getting involved at a level like IWEB might just be a bit of fun at first. All shares can be monitored for him to move into a higher quality market in time. Also I'm aware that by law you cannot give bad advice and this would be bad advice. Sort of like the doctors oath. Had to reword a question to a FA about cashing in an endowment years ago to make it a statement. Then he could proceed. Honourable in reality tbh.

financial guidance :

never marry a lunatic just cos she has a nice @rse

never buy a new car

overseas sun property investments are for mugs

Gym membership is daylight robbery

beer with an obscure brand-name is cheaper, and often better, than the p1ss with all the adverts on the telly

never buy anything from anybody who sells door to door

you cannot beat the Casinos (nor the bookies)

a drunken evening out in the West End is probably not worth it.

Scumbags with no class will throw money about like lunatics (reference my first bullet point). Often on posh products of conspicuous consumption. True aristocrats will pick up five-pence from the ground, as they walk past it.

before investing money for gain, you should pay off all your debts.

To purchase anything on the never-never is folly.

On big purchases, Always offer less than the asking price, as a matter of habit. Walk away and let them phone you a week later to accept your offer.

many insist on doing business with a 'professional' but do not underestimate the benefits you can get from an incompetent idiot.

Edited by PalazioVecchio (28 Apr 2020 11.52am)

Kayla did Anfield & Old Trafford

This is actually excellent advice

"It feels much better than it ever did, much more sensitive." John Wayne Bobbit

Sell all your shares within 10 years, no matter how you feel about it. Buy shares after the inevitable crash in the economic life cycle.

COYP

a robber can steal more money with a suit & briefcase than he could with a balaclava & shotgun.

Kayla did Anfield & Old Trafford

Gym membership depends on how much and what you use there. For a lot of people it probably is a waste of money, especially years ago when people joined in January, didn’t go beyond February and were locked in for a full year.

You could of course buy all the equipment but decent stuff isn’t cheap and you need the room. There are gyms that are very sociable places so an added value and motivation.

COYP

Good point, but slghtly overstated I think (though your comparison made me smile). BP this morning announced that it was maintaining its dividend, which I gather wasn't universally expected, and which has led to a 1.4% rise in the share price.

And I see that a firm of stockbrokers has suggested that on the basis of what it regards as realistic assumptions the FTSE 100 Index will yield 2.7% in 2020. And there must be at least a chance that dividends will be restored/increased in 2021. So potential total returns still in my opinion look attractive.