If we thought last week was bad for the FTSE 100, this week is shaping up to be even worse, as more people see it as time to panic.
It’s only a week since I pondered the thought that the FTSE 100 could drop below 5,000 points, and it’s already happened. On Monday, the index of top UK stocks fell as low as 4,899 points, before ending the day back above 5,000. And on Tuesday, it broke downwards again, briefly dipping to 4,979.
I said last week: “What if it crashes as far as 5,000 points and below? We’ve seen levels that low as recently as 2010, and the banking crisis sent the index plummeting below 4,000 at one point.”
Best buying time?
I made the point that back in the depths of the financial crash, we private investors were looking at one of the best buying times of our lives. And we’re facing another great buying time now. But it can be hard to see it at the time, when the value of our existing holdings is plummeting.
Do you know how much my stock portfolio has fallen since the coronavirus first struck? Do you have any idea of the size of the hit my pension investments have taken? Obviously you don’t. But you’re in good company, because I don’t know either. I haven’t checked. It’s just not something I’m thinking about. I mean, what’s the point? Can you do anything to prevent a fall that’s already happened? No, so there’s no need to worry about it.
Priorities
I have a different take on priorities. For one thing, I have virus symptoms, and I’m in splendid isolation. So take care of your health first. And keep in touch with friends and family, give them a call, see what you can do to help — especially for older people.
But back to the FTSE 100, what should we do now? Well, one of Warren Buffett’s well-known quotations comes to mind: “I buy on the assumption that they could close the market the next day and not reopen it for five years.”
So if you’re worried about the value of your stocks and where they’ll go in the coming weeks and months, I say just try to switch off and think about where they’ll be in another year, in two years, in five.
Sure, the FTSE 100 could fall even further, maybe even this week. But don’t forget, the banking crisis sent the index spiralling below 4,000 points. And that was a time to buy, not sell. They were times to lock in some top dividend yields to provide reliable income for decades to come.
A long buying summer
I think it’s likely that stock markets will remain weak for some time yet. Very possibly until the peak of virus cases has passed. And with the current approach being to delay the spread as long as possible so as not to exceed the capacity of health services, I’m hearing people suggesting several more months yet.
If you don’t do anything else with your money over those few months, I reckon it could be a great time to drip-feed cash into an index tracker. I’m confident that every pound you invest this year will be worth significantly more in five years’ time.
