The FTSE 100 (FTSEINDICES: ^FTSE) has been the victim of some vicious headlines this year. Words like falter, fear, worst, lowest, concern and crisis have been used with abandon.
To date, the index is down 242 points since the beginning of 2014, and breaking news in Ukraine continues at a clip, battering the index on an almost daily basis.
If your money is tied up in the stock market, it’s perhaps understandable that you’ve felt one or two of the above words yourself — fear and concern.
If you’re worried, I’d say that’s a pretty natural inclination. You may also feel the inclination to protect your wealth. That is: avoid the market and save your cash instead.
To that end, I’d implore holding your nerve. There’s no better option than equities, and I’ll explain why.
Gold isn’t the safest haven
A long-time favourite of nervous investors seeking a safe haven is gold. Gold was out of favour for most of 2013, as the price of the metal fell 25%. This was gold’s biggest decline since 1981.
The first aspect to gold’s price is basic supply and demand. If there’s more of the stuff than people want then the price falls. The reverse, naturally, is true as well.
But in times of crisis the price soars, as we’ve seen over the course of the past month, with gold hitting a six-month high last week.
The price is volatile, however, and gold has since fallen back as tensions over Ukraine have eased.
Look at it this way
For comparison’s sake, gold is useful. When you buy gold you’re buying something tangible — it’s heavy, shiny and yellow.
When you invest in the market your purchases might look fuzzy sometimes. Coloured arrows, graphs and charts fly around with abandon.
What it comes down to is this: when you buy shares in the FTSE 100, you’re buying into British business. That’s the main thing you need to know.
Unlike gold, these companies — that you become part-owner of — pay you an income. Moreover, you can spread the risk over a range of different industries.
Right now, shares are affordable
Five years ago, the FTSE 100 fell below 3,500. The banking system was on its knees but since then shares in the taxpayer bailed out banks Lloyds and RBS are up 71% and 40% respectively.
If you were brave enough to buy shares in Barclays your investment would have surged 222%.
As the UK economy recovers, analysts expect the blue-chip index to hit 7,000 as early as mid-April. Before that happens, if you’ve got the nerve, there are attractive blue-chips trading at a deep discount.
