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How I’d invest £2k in a Stocks and Shares ISA as the FTSE 100 crashes

As I write this, the FTSE 100 is falling again. That’s no surprise, it has plunged by around 1,000 points since the start of the year. However, after 10 years of steadily rising share prices, a dip was bound to come at some point. Remember, these are only paper losses, unless you lose your head and sell in a panic.

What you need to do is keep calm and carry on holding your money in the market. Whether you have £1k, £2k, £5k or more at your disposal, you should also consider taking advantage of recent falls to buy top UK stocks at today’s reduced valuations. The market has a great track record of always posting a recovery after a correction, and I reckon it will do so again.

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I would recommend buying shares through a Stocks and Shares ISA, as that way you will not pay any tax on your gains, for life. This financial year’s £20,000 ISA allowance expires on Sunday 5 April, so don’t squander it. You don’t have to invest it all at in one go, you could park it in cash to secure your allowance, and drip feed it into the market in the months ahead.

Top companies going cheap

Investing today is not without risk, as the coronavirus could get worse before it gets better, and shares could therefore fall further before they start rising. I would therefore prioritise solid blue-chip companies with strong fundamentals, generous dividends well covered by cash flows, loyal customers, and manageable debt. Now is the perfect opportunity to buy desirable stocks like these.

One option is to invest in pharmaceutical and healthcare companies, which typically fare better in a downturn, as people continue to get ill in a recession. Given current worries, they could do particularly well right now.

While stock markets fall, online share-trading services such as Plus 500 and IG Group have seen their share prices climb, as traders take advantage of the volatility to bag some outsized gains. Companies supplying hygiene and medical items, such as Bunzl, or hand washing and sanitising services such as Rentokil, have seen customer demand rise, online platform AJ Bell has noted.

Supermarkets have also been pretty solid, notably Sainsbury’s and Ocado, as investors expect home deliveries to rise, while shoppers are stockpiling.

Risks and rewards

Some will be tempted by the travel sector, as tour operators, airlines, hotel companies and cruise operators take a massive hit. This sector may recover fastest of all when coronavirus worries recede, but these are only for those willing to take a bit more risk, in the hope of enjoying a higher reward. The same goes for fossil fuel companies, which have been punished as economic activity slips, and travellers stay put.

Do not try to trade stocks to bag a short-term profit, but invest with a long-term view. Buying bargains now could really pay off when signs emerge that the worst of the virus is over. When that happens, you will be holding high-quality businesses, with bright futures ahead of them.

Are you prepared for the next stock market correction (or even a bear market)?

It’s official: global stock markets have been on a tear for more than a decade, making this the longest bull market in history.

But this seemingly unstoppable run of success poses an uncomfortable question for investors: when will the current bull market finally run out of steam?

Opinions are split about whether we’re about to see a pullback — or even a bear market — in 2020. But one thing is crystal clear: right now there’s plenty of uncertainty and bad news out there!

It’s not just the threat posed by the coronavirus outbreak that could cause disruption — Trump’s ongoing trade-war with China and the UK’s Brexit trade negotiations with the EU rumble on... and then there’s the potential threat of both the German and Japanese economies entering recession...

It all adds up to a nasty cocktail with the potential to wreak havoc and send your portfolio into a tailspin.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.