To say that it’s a bad time for global stock markets would be an understatement. The FTSE 100 closed below 6,000 yesterday, falling to its lowest since early 2016. With no end to COVID-19 in sight and the full extent of its impact on the economy still unknown, investing can appear to be a big challenge right now.
But I think it’s exactly times like these we should be following Warren Buffett’s advice of being greedy when others are fearful. These can be great times to buy high-quality shares at huge discounts. Proactive investing decisions taken at this time can hold investors in good stead in the future when there is a turn for the better. In other words, despite our first instinct to panic in such a scenario, selling stocks isn’t the move I’d make.
Consider selling gold
I’d consider selling my gold holdings now, however. This might sound contrarian, but it’s not. All of us want to maximise gains on our investments. The gold price is at its highest in seven years, since the yellow metal’s prices rise most when there’s uncertainty in the air. Like, right now. If I’d been holding it for the past five years, my investments would be up 45% by now.
My gains have never been higher, giving me a reason to sell off some of my holdings. I wouldn’t sell all of them, however, right now. Gold prices could rise even further if question marks on the future of global markets persist. I’d let the rest remain invested for now. Also, in the unlikely event that things get catastrophic, gold is really the best investment.
Buy high-quality FTSE 100 stocks
Gains from selling gold can be re-directed into high-quality stocks. I have long liked the consumer goods biggie Unilever and there are new reasons to like it now. One, sales of cleaning agents like hand sanitisers, hand washes, and wipes are on the rise as health concerns are at the top of consumer minds. These, among plenty of others, are exactly the products ULVR manufactures. Two, as a consumer defensive stock, its performance and share price are likely to be less affected by a downturn. Since the start of the year, the FTSE 100 is down over 21%, but the ULVR share price is actually up 1%. Three, it’s a financially healthy company whose share price has dropped by 6.6% from the highest levels seen in 2020 so far, at the start of February.
Another stock I like is Diageo, which was also my top share for March. The company management has warned of a hit to profits because of the coronavirus. There’s no denying that its sales will be impacted by travel restrictions and the avoidance of public spaces. But going by its performance and the durability of alcohol demand, chances are that it will bounce back. Its shares are down over 13% since the start of 2020. There couldn’t be a better time to buy it.
