Stock market crash: I’d buy this FTSE 100 share to protect myself

Worried about another stock market crash? You probably should be, says Royston Wild. And he thinks you can prepare yourself for one by buying this FTSE 100 giant.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

It’s clear that the global economy faces the sort of upheaval that hasn’t been seen in living memory. The Bank of England recently predicted that the UK economy will see its biggest downturn in 300 years in the wake of the coronavirus outbreak. Regional and worldwide forecasts continue to get worse and worse as the true costs of the pandemic become apparent too. Don’t rule out another stock market crash!

The boffins at HSBC are the latest to scrub out their most recent estimates and replace them with something chilling. Late last week they predicted that the world economy will shrink by 4.8% in 2020. This is a full 1.5% worse than the predictions the bank put out in early April.

You might think that buying gold or gold-exposed assets like stocks in yellow metal producers would be a good idea in this climate. But loading up here is not the only game in town for safe-haven seekers.

Why not try to get access to silver instead? This is a classic hard currency that stands to gain from the uncertain economic and political consequences of Covid-19. Not to mention the growing concerns over fiat currencies that renewed quantitative easing is causing.

Bright forecasts

The metals analysts at Morgan Stanley certainly believe there are dazzling days ahead for gold’s little brother. Silver was recently changing hands at $16 per ounce and the number crunchers reckon it will average $14 in 2020 and $16 in 2021. Don’t switch off though as things get much more exciting from then on. The shiny asset will hit $18 in 2022 before breaking $20 in 2023, the banking giant reckons. Its long-term target sits at $23 per ounce too.

Don’t just think of silver as a great asset to have exposure to in these troubled times. It’s likely that the metal’s dual role — it serves as both an industrial and an investment commodity — will support solid price gains as the global economy begins to recover later this decade. The commodity is used for a broad range of practical purposes, such as in medical procedures and for the manufacture of electrical goods.

Screen of price moves in the FTSE 100

A top FTSE 100 pick

I reckon one great way to play the silver price is to buy shares in Fresnillo (LSE: FRES). The FTSE 100 company’s shares don’t come cheap. At current prices it trades on a forward price-to-earnings (P/E) ratio of above 35 times. But it’s worth remembering the Mexican mining giant carries a dividend to help cushion the blow, something which investors don’t get if they buy the physical metal or financial instruments like exchange-traded funds (or ETFs) that are backed by silver. This yield sits at a handy 1.5%.

Having exposure to precious metals is always a good idea. Stock market crashes are nothing new and as the coronavirus outbreak proves, they can happen at any time and be truly devastating. So whatever your broader attitude to risk, I reckon buying shares in FTSE 100 firm Fresnillo and holding them for a long time is a great idea.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Fresnillo and HSBC Holdings. 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.

More on Investing Articles

Illustration of flames over a black background
Investing Articles

2 red-hot UK growth stocks to consider buying in April

These two growth stocks are performing well, but can they continue to deliver for investors through 2024 and beyond?

Read more »

Charticle

Is JD Sports Fashion one of the FTSE 100’s best value stocks? Here’s what the charts say!

The JD Sports Fashion share price remains a wild ride during the first quarter. Could it be one of the…

Read more »

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »