FTSE 100 shares are in for a tough time as the news flow from Ukraine continues to shock and appal. The index crashed by 3.48% on Friday, and I’m bracing myself for further extreme volatility in the days ahead.
On Friday, more than £100bn was wiped off FTSE 100 valuations. Any fleeting pain investors might have felt is nothing compared to what the Ukrainians are going through, so we should keep things in perspective. I feel the stock market crash is a price worth paying for standing up to aggression.
Stay calm, it’s only a stock market crash
We can’t do much about Ukraine, except send money and show our support, and there’s nothing we can do about the FTSE 100 crash. There never is. All I’m doing is reminding myself that share prices have always crashed and they always will.
Typically, they recover faster than people expect and go on to outperform almost every other asset class in the longer run. So the first thing I do when the FTSE 100 is going into a downward spiral is… nothing.
I never invest money in the FTSE 100 that I might need in the next five years (in practice, the next 10 to 15 years). That allows me to overlook my short-term fears, and focus on the longer run. If I sold now, I would probably miss out on the recovery, when it finally arrives. I’d then do something even dafter, like buying back in at the top of the market.
I don’t have any idea whether now is a good or bad time to buy or sell shares. Nobody can time the market with any consistency, and don’t believe anyone who claims they can. There are too many variables. Even computers can’t work it out. I suspect they never will.
What I do know is that the FTSE 100 has dropped 500 points in a week. That makes today a cheaper time to buy shares than a week ago. So that’s what I’ll do. The index may crash again after I bought them, but if it does, I’ll buy a few more.
My portfolio is exposed to stock market volatility because I take a relatively high-risk approach to investing. Now I’m tempted to add one or two defensive stocks to my line-up. While the FTSE 100 fell on Friday, utility stocks Severn Trent, SSE and United Utilities Group held firm.
Stand by your FTSE 100 shares
Human beings are not blessed with the gift of foresight. I get round this by building a diversified spread of FTSE 100 shares, balancing riskier growth stocks with defensive alternatives, investing for the longer term and reinvesting my dividends for growth.
History shows that stock markets always recover in the end, even from the bloodiest wars. As well as trade tensions, pandemics, financial crises, tech crashes and just about everything else. I’m holding on until that day. I’m telling myself it will come. Given time.
It’s not guaranteed, but it always has bounced back in the past.