How to invest in a crisis: Stock markets have plunged


How to invest in a crisis: Stock markets have plunged… But you need not abandon shares just yet

It’s a brave soul who puts a large lump sum into volatile markets – and the £20,000 annual Isa allowance is a very big sum for most. 

But you can now put your money into an investment Isa wrapper, leave it in cash and invest it in stocks gradually over the course of the year. 

All the major fund supermarkets will allow you to hold cash — though you can forget about earning interest. 

Panic stations: It’s a brave soul who puts a large lump sum into volatile markets – and the £20,000 annual Isa allowance is a very big sum for most

It might seem counter-intuitive to invest in falling markets, but buying as prices fall may mean getting more for your money, so long as you’re in it for the long term. 

Jason Hollands, of Bestinvest, says: ‘A sensible approach is to drip-feed in stages over weeks, to help smooth out your average purchase price. 

‘Few people like the idea of investing a large sum, potentially only to see a dramatic slide in value within days: this can prove a deterrent to investing during periods of market turmoil. 

‘Investing gradually— or on a regular basis — is a great discipline to overcome this fear.’ 

You can also use this as a time to put extra balance into your portfolio. If you’re stacked with UK funds then look globally, and vice versa. 

Tom Stevenson, at Fidelity International, says: ‘Ensuring your portfolio is well-diversified across a mix of assets, from shares and funds to bonds and cash, and across different sectors and geographies, is important at any time.’ 

There are several types of fund which invest in a mix of shares and may be run by a specialist manager or a robot (in the case of those tracking a particular index).

If you are planning to try to buy on the dips — that is, after a heavy fall — then investment trusts have a key advantage. 

Because they are themselves companies with shares, you will be quoted a price when you buy and sell. The same goes for exchange-traded funds, which include many market trackers. 

So where should you look? The young should not take too much notice of market volatility. Even if markets fall further, there is plenty of time to recover. 

Older investors might want to exercise more caution, although there is an argument that this no longer applies because even in retirement, many will be wanting to keep their money invested to supply an income. 

So which funds stand out for the experts? Tom Stevenson says new investors might consider Artemis Global Emerging Markets Fund. Jason Hollands says he’s ‘a huge fan’ of Scottish Mortgage Investment Trust. 

Ryan Hughes, head of active portfolios at AJ Bell, says: ‘Using a passive tracking strategy will give the investor an instantly diversified portfolio and keep costs as low as possible. 

‘For those interested in investing in well-known names in the UK, the iShares UK Equity Index fund looks to track the FTSE All-Share Index and charges 0.06 per cent a year. 

For investors who want to look globally, the Lyxor Core MSCI World ETF tracks the world’s biggest companies for 0.12 per cent.’ 

Older investors may want to consider Fidelity Select 50 Balanced Fund, Mr Stevenson says. 

‘This fund divides its assets between shares and bonds and invests all around the world, so it is well-placed, whatever the environment.’ 

Mr Hollands suggests considering well-managed income funds, such as Threadneedle UK Equity Income and JO Hambro UK Equity Income. 

But when investing remember the following: this crisis is unlike anything we have known before. 

We do not know how long it will last, what the longterm impact on the economy will be or how long recovery will take. Anyone who says any different is guessing or bluffing.

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