Stock markets have been volatile this year as a result of concerns about rising inflation and the health of the UK economy.
Is now a good time to buy shares?
- Some seasoned investors would say it’s good to buy at a time when stock markets are low. The idea is, you get more for your money and the value of your investments will rise when markets pick up again.
- Let’s look at the FTSE 100, which is formed of the 100 largest listed companies in the UK.
- Overall, the index is trading at around 7,320 points (15/09/2022). This is down 2.5% since the start of the year. But in general the FTSE 100 has been steadily climbing since the outbreak of the Covid-19 pandemic in 2020 and is now trading at its pre-pandemic levels.
- This suggests big companies are continuing to grow and also appear to be coping with the cost of living crisis relatively well. So if growth continues, then now would be a good time to buy shares.
- Others would say you should never try and time the stock market. The best way to get a positive return is to invest for the long term. This gives your investment a chance to ride out stock market ups and downs and eventually you would hope to sell for a profit.
Four tips for investing during uncertain times
- Stay calm: the war in Ukraine and the cost of living crisis have stirred up a lot of emotions, but stay rational about your investments.
- Consider your aims: Your choices depend on your circumstances, objectives, needs and risk tolerance.
- Make the most of tax relief: you can invest tax-free with an ISA. You can also get an instant uplift with a pension and a Lifetime ISA, as the government will add extra cash whenever you pay in more money.
- Drip-feed your money: if the markets go down further you’re buying at a cheaper level and it could help smooth out your returns, with the hope they recover and grow in the longer term.
Should I sell my stocks?
In June 2022 there was a huge sell-off across the major stock markets, causing prices to plunge.
Should you do the same and sell your stocks? It all depends on your reasons for wanting to sell.
Here are some things you should think about before selling:
- Are you panic selling? It’s never a good idea to panic when it comes to investments. Keep a clear head and wait for the storm to pass.
- If you sold your stocks now, would you be making a loss? If you sell you could end up crystallising losses which you could regret if the stock market later recovers.
- Successful investors tend to buy when others are fearful because they can bag a bargain: so should you actually buy more stocks rather than sell them?
- Remember why you invested in the first place: is the company still a good business that has potential to improve? Unless the prospects for the company or the sector have changed radically then it might be a good idea to hold on for now.
