The FTSE 100 is in a bad place, to say the least. It’s down by 32% from the start of 2020, at time of writing. Investing portfolios are in tatters because of this stock market crash. And there isn’t much light at the end of this tunnel despite coordinated quantitative easing and economy boosting measures by policy makers around the world. Nervousness around not just investment values but livelihoods is on the rise.
Stay away from the Cash ISA
At this most uncertain time, I think it’s tempting to hang on to what we can be sure of. In terms of investing, this can mean holding our savings in the Cash ISA. Even with its low returns, at least it’s dependable, right? The more important question to me, is this: What good are these low returns if they make me worse off in real terms? To put it succinctly, safety in a Cash ISA is an illusion.
It’s time to sell, not buy gold
Now consider gold, another tempting investment at times when we can get so fearful we don’t know what’ll happen next. But if gold prices are an indicator of how fearful we truly are, there’s good news. Since its high at the end of last month, the gold price is now down by 11.5%. Even when it was high, I was of the view that this is the time to sell gold.
After all the measures announced to contain COVID-19 and keep the economy and financial markets together I am even more convinced of that. In fact, if there was any time to sell it, it’s now – before gold prices drop even more.
As deeply upsetting as the human tragedy caused by the coronavirus is, some solace can be taken from the fact that there is room for relatively a fast turn-around in the FTSE 100 and the economy if it’s contained in the near future.
FTSE 100 stocks are cheap
And if that happens, FTSE 100 stocks that are now available at a huge discount will start rallying. Even if the economic turnaround takes its time, I reckon the stock market slump will bottom out soon because of a highly liquid financial system. But for now there’s a wide array of choices to pick from whether we are dividend or growth investors.
For dividend investors, yields haven’t been better in a long time. As many as five FTSE 100 shares offer dividend yields of over 15% and 20 offer yields above 10%. If that isn’t a lot of choice, I don’t know what is!
For growth investors cyclicals like real estate, banking, and oil stocks have seen big price crashes. I would advise careful analysis before investing in individual stocks, but at least some of them hold great promise as we move past the stock market crash and indeed, the coronavirus crisis.