Investors have all been taken by surprise this year.
Coronavirus wiped billions of pounds off the value of investments in March, and now a second wave is threatening to cause more problems.
So we asked the experts what investors are concerned about — and what they need to know.
A stellar bet? The Tesla car they sent into orbit. Until recently, prices for the U.S. tech giants have been marching up, led by the rise of online shopping
Will a second wave cost me?
At the end of March the FTSE 100 recorded the largest quarterly fall since Black Monday in October 1987, following the financial panic caused by Covid-19.
‘It’s understandable that savers are worried about their pensions and investments,’ says Hannah Edwards, managing director of Eva Capital Management.
‘Since the first wave when the market lost as much as 34 per cent from the start of the year, it has rallied but is still way off 2019 levels – and it will react to uncertainty posed by any new lockdown measures imposed for a second wave of Covid, as we have seen this week.
‘But investors must focus on the long term and the recovery.’
Ms Edwards says the market is prepared, with some listed firms now in a stronger position following redundancies and other cost-cutting measures.
The end of the furlough scheme in October could trigger more job losses but this should not result in market falls as extreme as before.
Britain’s 12-month transition period after it left the EU ends in a few weeks, which may also worry investors. Ms Edwards recommends a well-diversified portfolio and avoiding making hasty decisions due to Covid-related market reactions.
How can I reduce risks?
Now is a good time to review and question how your money is invested, says Danny Cox, chartered financial planner at Hargreaves Lansdown.
‘Trim the funds that have done best by taking some of the profits and add the proceeds to the funds that have done less well.
‘That means you are selling high and buying low, and keeps your portfolio on the same risk track as when you started.’
Mr Cox adds: ‘You can’t control the performance of your investments but you can control how to react. If you take your money out when you see it drop, you risk buying investments back at the wrong times, undoing the good work you’ve already done.’
He recommends having cash set aside for emergencies, so you don’t have to dip into your investments at the wrong time.
Should I invest in the US?
The main financial markets in the US — the S&P 500 and Nasdaq — have been soaring.
Janet Mui, investment director at wealth manager Brewin Dolphin, says: ‘Stock markets are factoring in better economic activity for the future.’
Ms Mui points out that the lion’s share of the growth has been thanks to so-called FAANG stocks — Facebook, Amazon, Apple, Netflix and Google — which she says will continue in the next 12 months, with bouts of volatilty as we are seeing now.
We can expect more in the run-up to the election — and even beyond that if there is no clear winner.
For a quick, simple approach to investing in the U.S., Ms Mui suggests the Vanguard S&P 500 ETF, which charges just 0.07 per cent and tracks the benchmark S&P 500 Share Index.
For those wanting greater exposure to U.S. growth sectors, the Invesco Nasdaq 100 Share Index tracker charges 0.3 per cent.
Boom time: The main financial markets in the U.S. — the S&P 500 and Nasdaq — have been soaring
Does tech still look a good bet?
Until recently, prices for the US tech giants have been marching up, led by the rise of online shopping, use of mobile devices and the fact that tech is no longer a niche sector.
‘These trends over the past decade have been accelerated by the pandemic,’ says Darius McDermott, of advice firm Chelsea Financial Services.
‘Investing in stocks when prices have fallen can be a good strategy. In March, the share prices of these companies fell along with the market and they have since doubled in some cases, such as Zoom and Netflix.’
However, he says that while prices have fallen, they are still expensive.
‘In the long term, though, tech is still a very good investment.’
Mr McDermott suggests diversifying investments in the sector, including regions away from the UK, where tech prices may be more reasonable.
Invest AND improve the world
Can you make a profit and get your money to do some good?
Most personal investors are just ordinary people trying to grow their wealth over the long term – and like the population at large many of them care about the environment, people being treated well and business being done properly.
On a This is Money investing special podcast, Simon Lambert and Rob Morgan, of Charles Stanley Direct, explore how to invest for profit and improve the world we live in.
Press play to listen to the episode on the player above, or listen at Apple Podcasts, Acast, Audioboom and Spotify or visit our This is Money Podcast page.
What about my property fund?
Property funds were frozen by investment management companies in March because of uncertainty around valuations of the buildings.
The path for suspended UK property funds to reopen has now been cleared but so far, just four have agreed to lift suspensions – St James’s Place and Columbia Threadneedle, holding £3.6 billion and £1 billion of savers’ money respectively, are now open.
The £2.9 billion L&G Property fund will allow withdrawals again from October 13, and Royal London Asset Management yesterday said its fund will reopen on September 30.
Oliver Creasey, equity research analyst at Quilter Cheviot, says investors have no option but to wait: ‘Fund managers will be desperate to avoid a scenario where a fund reopens and is forced to close again if there are too many withdrawals.
‘The L&G fund is particularly well capitalised, with over 29 per cent in cash or shares, and has one of the better property portfolios.’
He says he is least hopeful for those funds run by Aegon, which has reported a cash balance of only 7 per cent as of end-July.
Once the funds reopen, be prepared for the value of your investment to have fallen.
Platform AJ Bell suggested losses could be around 9 per cent.
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