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After the FTSE 100’s worst day in 2 months, what should I do now?

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FTSE 100 in biggest fall for two months,” and “£37bn wiped off London’s blue-chip index,” ran the headlines on Tuesday. After a few tentative days above 7,000 points, the lead London index took a dive. Losing 140 points, the Footsie ended the day at 6,860.

It seems it’s down to fears that we’re likely to see a third Covid-19 wave later in the year. In a press briefing, prime minister Boris Johnson affirmed that “…the majority of scientific opinion in this country is still firmly of the view that there will be another wave of Covid at some stage this year.”

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He added: “And so we must, as far as possible, learn to live with this disease as we live with other diseases.”

Are we in for further lockdowns, more hits on British businesses, and a prolonged FTSE 100 downturn? And what should I do about it?

Well, firstly, those headlines. Instead of telling us how far the market fell on Tuesday, the newspapers could have gone with “FTSE 100 up 2% in April,” or “Footsie gains 6.4% in 2021.” Both of those are really pretty positive moves. I’d be delighted if my investments rose in value by 2% every month.

FTSE 100 doing fine

But that wouldn’t grab people’s attention quite so much. Saying that, Wednesday’s headlines are a good bit less dramatic, speaking of a rally and a mild recovery. At the time of writing, the FTSE 100 is back up 25 points.

While I’m not surprised to see a short-term market reaction to the latest Covid talk, I am disappointed. I’m disappointed that so many big investors chase the daily ups and downs. They’ll sell out one minute, only to buy back in the next. And, looking at the bigger picture, it seems such a waste of time.

I’m reminded again of Warren Buffett, who famously said: “I buy on the assumption that they could close the market the next day and not reopen it for five years.”

Let’s imagine two investors, both holding FTSE 100 shares in early 2020. One of them sold out shortly after the big crash and took a big financial hit. The other acted as if the market had just closed and didn’t look again.

Market closed

That second investor, assuming their investments tracked the FTSE 100 reasonably closely, would be down only around 7% today. That’s over one of the worst economic crises that’s hit the world in a long time. And, I think, it really shows the resilience of FTSE 100 companies over the long term.

It sums up my approach pretty well. A third coronavirus wave? Well, we’ll be a lot better prepared (and I’ve already had my vaccinations, as will a lot of the country). So I’ll just keep on doing what I’ve always done — buy shares whenever I have a further sum to invest. And, in between purchases, I’ll pretend the market is closed and pay no attention to day-to-day movements.

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Alan Oscroft 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.

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