The Motley Fool

Coronavirus market crash: should I stay invested or start a Cash ISA?

Image source: Getty Images

With the high volatility being seen in stock markets around the world due to the coronavirus, many investors are wondering when the market crash will be over. We’ve seen some encouraging signs of stabilisation over the past few weeks, but caution is definitely warranted.

Whenever we’ve had a market crash (think back to the early ‘noughties’ or 2008/09), stock market critics surface and say that you’d be better off holding cash instead. Is there merit in this case? For me, not really.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

V-shaped recovery

You’ll likely have seen the above phrase used a lot recently. Instead of V, some are using an L or W. Each letter denotes the potential stock market movement after the coronavirus market crash. Each letter starts with the sharp fall (which we’ve seen). The question is, does it then flatline like an L, bounce back quickly like a V, or stay choppy like a W?

I can’t tell you what will happen, but history does show us that a V or a W are the most likely moves from here. What this means for investors like myself who are holding stocks that have taken a hit over the past few months is that I should stay invested. If I sell now and move into a Cash ISA, I will be cementing my losses from the crash. And if we do see a rally over the summer (or even later), I won’t be able to benefit at all

Cash ISA returns are too low

If I was being offered a 5% Cash ISA rate for this year, it would make the choice of staying invested a lot harder. But currently, one-year Cash ISA rates are ranging just above 1%. This skews the scales much more towards staying invested in stocks. 

Say I’d bought a FTSE 100 tracker fund at the beginning of the year with £1,000. I’d be down around £250 so far. If I sold it now and invested it in a Cash ISA, it would take me around 29 years with compounding to get back to £1,000! By staying invested, I’d hope to hit break-even within the next two years, maybe faster.

This is a really stark difference, and unless you think the stock market has more serious losses ahead, it just doesn’t make sense to switch right now.

Coronavirus market crash takeaways

Daily moves of 1% or higher have been seen a lot recently on the stock market. To avoid trying to time the market and short-term trading, remember that investors think for the long term. 

There are various good individual companies out there for which you can make a strong investment case. I wrote a piece here about Rolls-Royce and why the stock looks attractive to me right now. The market crash has provided good new investing opportunities, but at the same time don’t sell out of existing ones, unless you have a strong reason. 

Moving into cash right now would mean you’d need decades to recoup your funds, and could see you miss out on a stock market rally.

“This Stock Could Be Like Buying Amazon in 1997”

I'm sure you'll agree that's quite the statement from Motley Fool Co-Founder Tom Gardner.

But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.

What's more, we firmly believe there's still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.

And right now, we're giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool.

Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge!

Jonathan Smith and The Motley Fool UK have 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.

Where to invest £1,000 right now

Renowned stock-picker Mark Rogers and his select team of expert analysts at The Motley Fool UK have just revealed 6 "Best Buy" shares that they believe UK investors should consider buying NOW.

So if you’re looking for more top stock ideas to try and best position your portfolio in this market, then I have some good news for your today -- because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply enter your email address below to discover how you can take advantage of this.