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The FTSE 100 is sinking again! This is what I’d do now

Hopes that the FTSE 100 would get May off to a flyer began to evaporate before the month had even begun. With the Footsie reversing back towards the mid-5,000s, investor confidence, while not exactly shot, remains extremely shaky. And it’s possible that global share indices could remain firmly on the back foot in this new month.

There’s a lot of uncertainty out there over the social, economic and political costs of the coronavirus outbreak. Some of the data, like news that a staggering 30m Americans are now in the jobless queue, is enough to make many investors reach for the brandy. That’s no reason for stock investors to pull up the drawbridge though. Many Footsie stocks look very attractive at current prices.

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Think long term!

Volatility on share markets is, of course, nothing new. It’s something of which short-to-medium-term investors (those who only hold on to their stocks for a couple of years) need to be extremely fearful. No matter how good your investment decisions are, ultimately bad or unfortunate timing can end up costing you a fortune.

It’s not something that long-term investors need to worry about though. These are people who look to keep their shares for 10 years or longer. Studies show that these people can expect to generate average annual returns of between 8% and 10%. The longer the time frame, the better chance you have of absorbing temporary swings, no matter how severe they may be.

I’d argue that there are many excellent opportunities for Footsie enthusiasts to go out and grab at bargain prices. With a fresh £20,000 allowance for the new tax year there is plenty of scope for those with Stocks and Shares ISAs to build a winning portfolio.

Screen of price moves in the FTSE 100

Some top FTSE 100 buys

You don’t need to go out and take crazy gambles with your cash either. BAE Systems is one Footsie safe-haven I would be happy to load up on today. At current prices it trades on a forward price-to-earnings (P/E) multiple of 11 times and carries a bulky 4.6% dividend yield.

Why is this such a terrific pick for cautious investors, you ask? Well, robust weapons spending can be relied upon regardless of broader macroeconomic pressures. Data last week from the Stockholm International Peace Research Institute showed that global defence expenditure rose at its sharpest rate in a decade in 2019. This was in spite of a slowing world economy. Don’t expect defence spending to drop significantly in the wake of the Covid-19 outbreak either. The world remains too dangerous for that.

Nervous investors should also consider buying shares in FTSE 100 giants National Grid or United Utilities Group. The social, economic and political consequences of the coronavirus crisis will reshape the world in countless ways. But one thing is for sure, it won’t affect our need for electricity or running water. That makes these blue-chips brilliant rush-to-safety buys. And at current prices, they sport chunky forward dividend yields of 5% or thereabouts.

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Royston Wild 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.