Share prices remain in freefall today as the conflict in Ukraine escalates. The FTSE 100, for instance, is down around 3% as I type, and within a whisker of falling below the critical 7,000-point marker. From the biggest British companies to the smallest penny stocks, the carnage is affecting the vast majority of UK shares.
It seems like share markets are going to hell in a handcart and so it’s tempting to sell up and cut losses. This isn’t a strategy I’m willing to actually take though.
In times of panic it’s worth taking a step back and remembering that sensible investing is a long-term endeavour. If I sell today, I’ll have made a whopping loss on some of my stocks. By holding on I have a chance to watch them eventually recover in price.
The threats to share prices today
No-one knows how the unfolding tragedy in Ukraine will end. A variety of scenarios – from an immediate ceasefire and a drawn-out conflict as we saw in Chechnya, to (dare I say it) a large-scale war in Europe — are all on the table right now. Each will have a significant consequence on the macroeconomic and geopolitical landscape and, by extension, on stock markets.
It’s a daunting notion and one that throws up a whole heap of challenges for investors like me. However, I personally take comfort in the proven long-term resilience of stock markets. This is why I won’t sell my stocks simply based on how share prices are moving today. I’ll take that step back and look at how stock markets have behaved before, during and after previous crises.
Thinking about the Footsie
Looking at the performance of the FTSE 100 in recent decades is a good way to do this. During the past 30 years, Britain’s premier share index has risen 174% in value.
In that time it’s risen despite wars in the Middle East, a banking crisis, a sovereign debt crisis in Europe, Brexit and, more recently, a global pandemic. And many investors have made some terrific, life-changing returns in that time.
Looking at the bigger picture
The discomfort I may be feeling as an investor takes a back seat to the horrors I feel as I watch events in Ukraine. But as a finance writer with an investment content business, I have to think analytically as share prices slump today.
Watching the value of investments slumping is uncomfortable. But at times like these I remind myself that unless I sell my stocks, I haven’t actually made a loss. As I said, I’ll hold onto my shares in the hope of riding an eventual rebound and watching my portfolio soar in value again.
In fact I think times of market volatility like this provide me as an investor with an opportunity to buy some bargains. There are plenty of top companies trading very cheaply following the fresh share price falls of today.
And with a little help from experts like The Motley Fool I have a good chance of digging these out.