Investment markets… what now?
As we write, the FTSE100 is now 15% down on its high for the year. The FTSE All-Share Index is down 14%, and most stock markets around the world are in a similar position, if not worse. At the same time, interest rates are so low that they generate practically no returns.
So what should you do? Should you cash in all of your investments and put the money under the bed? Should you cash in all of your investments and buy a house, in the hope that you can lock away your money, that house prices will continue to escalate, that you can ignore the stamp duty, the capital gains tax and the income tax on rent generated? No. No is, of course, the answer. We have been through tough times before, and we will go through them again. There will always be booms and busts, but when we look at the last three or five years there has been reasonable growth, even taking into account the recent falls. When the markets are down, you could argue that this is the time to invest.
Of course, that is rarely what people do. Most are scared off when markets fall, and wait until they rise again before investing. But that is why most people are unsuccessful when it comes to investing. Everyone knows you should invest when the markets are low, but rarely does anyone do that. So if you have the capacity, go against the crowd, please take advice and ensure you have the risk explained to you.