Your money-making expert. Financial journalist, TV and radio personality.
Coronavirus and the stock market is all the news seems to talk about right now. It’s easy to start getting worried – but wait!
“Should I sell my shares and ditch my pension?” is the question we’re hearing from readers all over social media.
My answer is the same as Warren Buffett‘s: “Be fearful when others are greedy, and greedy when others are fearful,” and he should know!
In other words, go against the crowd. So, when all around are losing their heads and selling their investments, stand firm and don’t be spooked.
Easy to say I know, but investing is for the long-term so we all have to think that way. Here’s how to think of your pension, ISA and general investment holdings while the stock market goes mad!
There’s no doubting that coronavirus and the stock market go hand-in-hand at the moment. The news is full of scare stories about how much has been ‘wiped off’ the value of people’s pensions and I have been on TV and radio programmes answering questions about it. These are my views:
Really. You don’t need to even think about it. Yes, your pension is most likely very largely invested in equities (stocks and shares) and yes it has probably lost a lot of money. But in the long-run that doesn’t amount to a hill of beans.
At some point – maybe in a few months or maybe next year – the stock market will bounce back again. In fact, I think that when it bounces back it will do so in a really BIG way. Even if it’s a moderate bounce back, though, it will be worth the wait.
The history of the stock market is full of behaviour like this:
Andy Bell, CEO of the fund managers AJ Bell says “The current bear market — or fall of more than 20% — is the FTSE All-Share’s 11th since the launch of the index in 1962. The good news is that the average bear market lasts just over one year and the typical drop is 36%. By contrast, nine bull markets over the same period delivered an average capital gain of 142% over a typical period of more than four years.”
In other words – hold on, don’t panic. The coronavirus and the stock market drop will change things temporarily – but not for ever.
Again. Don’t panic.
Again, leave them there.
For most people, this is a short-term dip that will be followed by a bounce – probably a big bounce – so keep your head and your money in the same place.
In fact, if you haven’t already filled your £20,000 ISA allowance this tax year consider putting some in by April 5th. I’m not saying that we have hit the bottom of the market yet – no one can call that accurately – but we are certainly a long way down and, as China has already started to go back to work, it’s likely that the upturn, or flattening out at least, will happen in a few months’ time. That’s my prediction and I could be wrong but if the upturn doesn’t happen then it will happen at some point a little later.
Basically, it’s just a matter of time.
As above: I would leave them where they are and even consider investing more, depending on where you feel you are in your life.
As most of us are likely to enjoy long retirements – certainly longer than people used to expect – it’s worth having some money invested for the future while taking an income from the bulk of it. Now is a cheap time to invest in shares so consider being brave and putting your ISA money into shares, or stock market funds, that are likely to go up in the next year or two.
Whether your stock market investments are in an ISA or outside of them, hold on to the sides, don’t sell but wait for a few months at least. In fact, consider buying more if, like me, you think the market will bounce back again sometime soon.
Yes I know that’s a daft idea – after all, who has a mattress big enough to store all your millions?
But it’s an understandable approach.
The stock market has just lost you thousands of pounds so of course you’re going to want to take your money out and put it somewhere that feels safe, whether that is in an actual safe in your living room or in a bank or building society account that is literally giving no interest at all.
I will allow you to take your money out and put it in cash if:
What most people do is they buy into an investment, like shares, when everyone else does which is when it’s at its most expensive. Then, when the investment drops like a stone – as it is now with the stock market – they panic and sell.
Result? They lose – big time.
What you should do is…
Take Warren Buffet’s advice (see above) and buy when the investment is low (around about now and probably over the next couple of months) and then wait until everything is rosy, everyone else is buying and the price of shares has gone right up and then sell, making a nice fat profit.
Go and do it!
These are scary times but don’t panic, we’re here to help you every step of the way.
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*This is not financial or investment advice. Remember to do your own research and speak to a professional advisor before parting with any money.