Keep calm and carry on investing Foolishly

Investors who stay calm in stock market storms like this one will reap the rewards in the longer run, says Harvey Jones

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

We knew Monday was going to be a rough day for stock markets, but most people didn’t expect it to be this rough.

That dramatic 8.5% drop in China’s stock market set the tone, with even official Chinese state organs describing the rout as “Black Monday”. At time of writing the FTSE 100 is down 4.5%. Where it goes next is anybody’s guess.

Help! Panic!

Most of you will have been expecting something like this: analysts have been warning of a Chinese hard landing for several years. When the world’s second-biggest economy succumbs to panic, it sends a shiver down every investor’s spine.

Once you look past those chilling headlines about £56 billion being wiped off the FTSE 100 in a single session, you will find good reasons to stay calm. If you take the longer-term view, as we do at the Fool, you will see that this is merely a stock market shiver. And like every single stock market shiver that has come before, it will pass.

It is certainly painful watching the FTSE 100 wipe out all the gains it has made this year (and last year as well). But unless you do something daft, like selling up in panic, you haven’t actually lost any money yet. Please don’t join in the rush to sell, as all you will do is lock in your losses, and then you really will have lost money.

Time Is On Your Side

Nobody should be investing in stocks and shares over a shorter timeframe than five years. Ideally, they should be investing for 10, 15 or 20 years. If you do that, Black Monday will look like a blip. You won’t remember what all the fuss was about, and neither will your portfolio.

In October 1987, global stock markets suffered one of the worst crashes of all time. The US market fell 23% in a day, then topped that by falling 25% the very next day. That puts today’s troubles in perspective. By early 1988 markets had recaptured all of their losses. Yes, all of them. In just a few months.

For far-sighted investors, Black Monday has a bright side. The FTSE 100 is now down 15% since peaking at around 7100 in April. That makes today a manifestly better day to buy shares than four months ago, as there are amazing bargains to be had. Although it may be a bit too early to start buying today, as markets probably have further to fall, now is the perfect time to start writing your shopping list.

Shop While Markets Drop

Mining giant BHP Billiton and oil majors BP and Royal Dutch Shell are in the teeth of recent storms and clearly too risky for some, but if you’re feeling brave, you might note that all three now yield an incredible 7% or more.

Pharmaceutical favourites AstraZeneca and GlaxoSmithKline are incidental victims in the market rout. Both are now more than 5% cheaper than they were a week ago, yet they are the same great companies, with the same great prospects. Utility giant National Grid is down almost 2.5% this morning, but remains exactly what it was before: a solid long-term income play yielding more than 5%.

Nothing has fundamentally changed about a string of solid UK-listed companies, such as Centrica, Diageo, Reckitt BenckiserUnilever and Vodafone. The one difference from before is that they are all cheaper to buy, and offer higher yields.

Investing has always been a bit of a carry on. This week is nothing new. The crisis will pass and we will soon see what a great opportunity it was to buy your favourite companies at reduced prices. Provided you stay calm.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Harvey Jones has no position in any shares mentioned. The Motley Fool UK has recommended GlaxoSmithKline and Centrica, and owns shares in Unilever. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

 
 

More on Investing Articles

Investing Articles

5 steps to start buying shares with under £500

Learn how this writer would start buying shares with a few hundred pounds in a handful of steps, if he…

Read more »

Young happy white woman loading groceries into the back of her car
Investing Articles

The FTSE 100 offers some great bargains. Is this one?

Our writer digs into one FTSE 100 share that has had a rough 2024 to date, ahead of its interim…

Read more »

Smiling white woman holding iPhone with Airpods in ear
Investing Articles

£9,000 of savings? Here’s my 3-step approach to aim for £1,794 in passive income

Christopher Ruane walks through the practical steps he would take to try and turn £9,000 into a sizeable passive income…

Read more »

Group of young friends toasting each other with beers in a pub
Investing Articles

I’d buy 29,412 shares of this UK dividend stock for £150 a month in passive income

Insiders have been buying this dividend stock, which offers an 8.5% yield. Roland Head explains why he’d choose the shares…

Read more »

Red briefcase with the words Budget HM Treasury embossed in gold
Investing Articles

Could the new UK budget spell growth for these 6 FTSE stocks? I think so!

Mark David Hartley considers six UK stocks that could enjoy growth off the back of new measures announced in the…

Read more »

Investing Articles

With a 6.6% yield, is now the right time to add this income stock to my ISA?

Our writer’s looking to boost his Stocks and Shares ISA. With this in mind, he’s debating whether to buy a…

Read more »

Dividend Shares

This blue-chip FTSE stock just fell 12.5% in a day. Is it time to consider buying?

Smith & Nephew is a well-known, blue-chip FTSE stock with a decent dividend yield. And its share price just dropped…

Read more »

Investing Articles

At 72p, the Vodafone share price looks to be at least 33% undervalued to me

Our writer looks at a number of valuation measures to determine whether the Vodafone share price reflects the fair value…

Read more »