The Motley Fool

The stock market has crashed. Should I buy FTSE 100 stocks now?

The FTSE 100 fell almost 11% in a single day in mid-March, the biggest drop since 1987. This eroded the value of our investments in a big way. But if we didn’t end up panicking and selling, it wasn’t an actual loss. It was what’s called a ‘notional’ loss. To put it another way, if we’d decided to sell on that day, it’s what our investment would have been worth.

FTSE 100 on the mend

As it happens, the FTSE 100 has recovered since, and along with that so has the value of our investments. The headline index has wound up in the red compared to the day before in only four of the 12 trading sessions we’ve seen since. At its last close, the FTSE 100 was at 5,564. This is still way lower than the highs seen earlier in 2020 before the coronavirus crisis began. But it’s also a bit of recovery since the sharp fall. In other words, the way I see it, FTSE 100 already seems to be on the mend. Or at the very least, it’s no longer in free fall.

Claim your FREE copy of The Motley Fool’s Bear Market Survival Guide.

Global stock markets may be reeling from the coronavirus, but you don’t have to face this down market alone. Help yourself to a FREE copy of The Motley Fool’s Bear Market Survival Guide and discover the five steps you can take right now to try and bolster your portfolio… including how you can aim to turn today’s market uncertainty to your advantage. Click here to claim your FREE copy now!

Based on this, I’d feel more confident to invest now, if I didn’t a few days ago. There’s of course the possibility that it can start falling again on bad news, but I wouldn’t be too worried about that as long as I know that it will find its footing again. Just as it has more than once in the past.

Avoid timing the markets

Once I’m confident that I do want to buy shares at the low present valuations, however, it’s easy to fall into the trap of trying to time the markets. It’s entirely possible that the stock market is yet to hit its bottom, but it’s also futile to try and decipher when that will happen and wait to invest then. For a long-term investor, a good buy should typically provide returns irrespective of the timing of investment.

Investing opportunities to consider

These returns can be in terms of capital appreciation or a high dividend yield or both. A healthy and dependable FTSE 100 stock is capable of meeting one of the two requirements, if not both. Consider the analytics provider RELX, which has an enviable share price chart for much of the past decade, making for a positive growth investment. If I had bought its shares anytime in the past 10 years, chances are that I’d see a rise in the value of my investments by now.

Or consider the FTSE 100 insurance biggie Aviva, which has consistently made dividend payouts to investors over the past two decades. At present its dividend yield is a high 11.5%. It has a healthy dividend cover and it’s in an industry which is expected to see increasing demand overtime. It may well maintain its dividends through the current crash.

Both these can be profitable for the investor in the long term, despite the stock market crashes along the way.

There’s a ‘double agent’ hiding in the FTSE… we recommend you buy it!

Don’t miss our special stock presentation.

It contains details of a UK-listed company our Motley Fool UK analysts are extremely enthusiastic about.

They think it’s offering an incredible opportunity to grow your wealth over the long term – at its current price – regardless of what happens in the wider market.

That’s why they’re referring to it as the FTSE’s ‘double agent’.

Because they believe it’s working both with the market… And against it.

To find out why we think you should add it to your portfolio today…

Click here to read our presentation.

Manika Premsingh has no position in any of the shares mentioned. The Motley Fool UK has recommended RELX. 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.