Here we go again. As the stock market crash continues, the FTSE 100 is down another 5% again this morning. That’s despite yesterday evening’s £330bn ‘shock and awe’ business salvation blitz by chancellor Rishi Sunak.
If your nerves are feeling shredded, you’re not alone. Aside from all the coronavirus health concerns, many will be shocked to see their long-term investments down by up to a third this year. You have to be brave to invest during a stock market crash but, ultimately, you’ll be glad you did.
Recent weeks have triggered flashbacks to Black Monday in 1987, the technology crash of 2000, and the financial crisis in 2008. If you were investing then, you’ll remember how it felt. You also need to remember how it felt when share prices started rising again.
Stock market crash will not last forever
First, you probably felt a bit sceptical. It won’t last, you said. It’s just another dead cat bounce. Then the market edged a bit higher until you thought maybe the worst is over. And it continued, and you thought there something in this, I’ll start investing soon.
Unless you moved early, your next response was to kick yourself, as share prices recovered their losses far faster than you ever expected. At which point the buying opportunity was gone. Ouch.
FTSE 100 bargains galore
The stock market crash continues and it could have further to fall. In earlier crashes, share prices fell by up to half. We’re not there yet.
I’ve nonetheless started feeding money into the market to take advantage of recent drops. Paying in relatively small sums of, say, £1k or £2k, looks a sensible move to me, as valuations plunged throwing up bargains all over the FTSE 100. Some top blue-chips now are on sale at unthinkably-low valuations, due to the stock market crash.
For example, right now, insurer Aviva trades at just 3.9 times earnings. Broadcaster ITV trades at 4.7 times, tobacco giant Imperial Brands at 4.8 times, insurer Legal & General Group at 5.8 times, and housebuilder Taylor Wimpey at 5.9 times.
These are all astonishing valuations for companies who number their customers in the millions, or tens of millions. People will still need insurance, still want to watch TV, still smoke, and still need homes, even as the coronavirus continues.
Double-digit dividend yields to be had
The dividends on offer make now an exciting time to pick up bargain stocks. For example, Aviva yields a thumping 12.49%. ITV offers 12.24%. Imperial Bands a scarcely credible 15.78%. Legal & General exactly 10%. These make Taylor Wimpey’s 6.34% yield look positively small.
Naturally, dividends aren’t guaranteed and could be cut. If company earnings plunge due to Covid-19, today’s low valuations may be justified. These are the risks you take today.
I wouldn’t recommend putting all of your spare cash into shares, as the FTSE 100 stock market crash could continue. I would drip feed in smaller amounts. Starting with, say, £2k.
Good luck.