Given the current global situation, is now a good time to take risky investments? from Toby Trinder
Generally, around 60% of investments are put into equities as a way of growing money. An equity is essentially a stake in a company thus deeming you a shareholder. Since the Coronavirus outbreak the FTSE100 index dropped to around similar levels as to when the UK hit recession ca. 2008, around the 5000 mark. This rapid drop meant that we sold out of almost all equities and diverted the money into government bonds or property – a far more stable place to put money.
There was a period around 2008-9 whereby the FTSE100 troughed and flatlined for a few months, then of course spiked massively when the economy recovered meaning investing back into those equities was cheap and they started making money quickly. With the state of the economy now, there is a high chance that the same will happen – a trough followed by a rapid spike. The question is when will the recovery begin?
This week there has been a rise in the UK FTSE indices. This is likely down to a mixture of UK government promises (up to £330bn to small businesses) and the fact that people are overcoming the panic and shock that the virus outbreak installed. Unfortunately, it is extremely hard to predict an exact date when the market will risk consistently over a period of time, but, as it stands it is highly unlikely that the stock market will drop any lower. Thus, given careful monitoring it is probable that, soon, the opportunity to restore our equity position will arrive. Equities will be far cheaper when we do, but they will start to gain value rapidly as the economy recovers and the Coronavirus is defeated.