This year’s stock market crash is understandably unnerving so many investors. Yet it’s potentially giving a rare opportunity to buy into high quality FTSE 100 shares too.
From its highs of around 7,675 in January, the FTSE 100 index has now fallen to approximately 5,100. This decline of over 30% puts Britain’s main equity index into bear market territory.
Therefore today, I’d like to discuss three steps I’d take in this unpredictable market. My aim, possibly like yours, would be to protect my money now and even create wealth in several years to come. I’ll also highlight several FTSE 100 shares I’m considering buying.
Here’s what I’d doÂ
First of all, I’d still invest in a Stocks and Shares ISA. Our tax year runs from 6 April to 5 April. We’ve less than three weeks to use the individual £20,000 ISA allowance for this tax year.Â
Were there any FTSE 100 shares you liked before the market crash? Would you have invested in a company if the price had been lower? Well, here’s your chance now to buy into the shares via an ISA that has tax advantages.
Secondly, I’d reconsider my portfolio diversification strategy. Like many other investors, I’m wondering if we may already be in a recession. And certain industries tend to do better in times of slower economic growth.
A defensive company typically has a constant demand for its products or services. It isn’t correlated to the rest of the business cycle either. CNBC host Jim Cramer recently highlighted how important it may be to buy companies that “we can’t live without.” And I couldn’t agree with him more.
After all, we all have to buy daily basic essentials and continue our lives as normally as possible. Analysts regard consumer staples, healthcare companies, discount retailers, sin stocks (tobacco and drinks companies) and utilities mostly as defensive businesses. In other words, during a recession I’d bet on the consumer.
Finally, I’d pay attention to FTSE 100 shares that also have robust dividend yields and are likely to keep those dividends intact.
During mass market panics, some stocks may get sold off irrationally. But when investors plan to hold robust stocks for the long run — which I’d do — they’ll see the benefit of dividend reinvesting, returning even more cash on the initial investment.
The stock market crash is also making some of the UK’s best dividends stocks rather cheap. Passive income investors, such as retirees, could potentially benefit from investing in these companies.
FTSE 100 shares I’d consider now
Bear markets don’t occur very often. But when they do, it’d be important to buy into the top defensive businesses that may also provide investors with robust dividends. With this in mind, here are several large-cap shares I’m watching right now. I’d be willing to invest in them before the ISA deadline in April.
- AstraZeneca – dividend yield 3.6%
- BT Group – dividend yield 12.1%
- British American Tobacco – dividend yield 7.8%
- Coca Cola HBC AG – dividend yield 3.7%
- Diageo – dividend yield 3.1%
- GlaxoSmithKline – dividend yield 5.5%
- Morrisons – dividend yield 3.4%
- National Grid – dividend yield 5%
- Ocado Group – doesn’t pay a dividend
- Reckitt Benckiser Group – dividend yield 2.9%
- Tesco – dividend yield 2.9%
- Unilever – dividend yield 3.7%
- United Utilities Group – dividend yield 4.5%
As always, don’t regard these as formal recommendations. Instead, view them as a starting point for more research.