It’s fair to say the current market crash caught many investors by surprise. In the first few weeks of 2020, the stock market rallied to new highs. It looked as if, after several years of stagnation, the global economy was finally starting to take off.
Unfortunately, it now looks as if this economic growth has come crashing to a halt. Businesses all around the world are reporting a decline in trading activity due to the coronavirus scare.
Some companies are suffering a lot more than others. Airlines, the cruise industry, hotels and the hospitality sector are all facing substantial dips in demand. And there’s no telling when this will come to an end.
However, the indiscriminate selling that’s gripped the stock market over the past few weeks has thrown up some fantastic bargains. These could be too good to pass up for investors that can afford to invest for the long run.
Market crash opportunities
Some companies are better positioned to weather the current economic storm than others. For example, consumer goods giant Reckitt Benckiser, which owns the Dettol cleaning brand, among others, could actually see an increase in the demand for its products.
Meanwhile, Segro, which owns big box logistic assets around the UK and Europe, is unlikely to see a sustained drop-off in custom. Customers will want to maintain their relationship with the business as the demand for logistics assets isn’t going to decline over the long run. Therefore, customers will continue to ensure they pay their bills on time.
Now could be the perfect time to snap up shares in these businesses. They might even come out stronger on the other side of the virus outbreak.
Buy the market?
Another way to play the market crash is to buy the market as a whole. Picking stocks can be a challenging and time-consuming process. A great way to profit from market volatility, without doing much extra work, is to buy a low-cost tracker fund.
Buying a FTSE 250 or FTSE 100 tracker fund would allow you to play the market crash without having to worry about researching stocks. Plenty of other investment funds are also available. However, the primary benefit of using a tracker fund is cost.
The lowest cost of FTSE 100 tracker fund on the market at the moment charges less than 0.1% per annum and management fees. That’s compared to around 1% for most actively managed investment funds. The impact fees can have on your investment returns over the long term cannot be understated.
Keeping costs low
Over the past three-and-a-half decades, the FTSE 100 has returned around 9% per annum. At this rate, an investment of £10,000 could become £129,000. That’s after three decades of saving in a low-cost fund with charges of just 0.1% per annum.
On the other hand, if this money is invested in a fund that charges 1% per annum, the final pot would be worth just £100,000. An investor would pay £32k in fees over this period.
So overall, if you’re looking for investments in this market crash, high-quality stocks that offer a unique service, as well as tracker funds, could be worth investigating.
