What does the coronavirus moment mean for stock markets and investing?

Posted on

In the current climate, where the news shows us that more than a million people globally have contracted the coronavirus, it can be difficult to be positive.

This is especially true where your investments are concerned. Between 24th February and 23rd March 2020, the FTSE 100 index fell by around 30%. You have to go back to the global financial crisis of 2008/09 to see the index sitting at this level. Other global markets have experienced similar falls and all major markets are experiencing extreme volatility with significant positive and negative movements daily.

Of course, this volatility comes immediately after a time when many people were already wary of equities, thanks to the uncertainty caused by the UK’s departure from the European Union. You may well have been holding onto cash for a while now in anticipation of Brexit.

Investing in uncertain times

It is sometimes said that the stock market goes up the escalator but comes down in the lift. On 12th March this year, the FTSE 100 index dropped more than 10% in its worst day since 1987. In the US, the Dow and S&P 500 were also hit by their steepest daily falls since the same year.

But some experts believe that the current situation may offer opportunities for investors looking to get back into the market after three years of Brexit uncertainty.

Writing in the Telegraph, Tom Stevenson, investment director at Fidelity International, writes that “The best time to invest is not when you see light at the end of the tunnel but when the darkness is a shade less black.” But no one is sure quite how much further markets might fall, so thinking of investing a lump sum now might rightly make you nervous.

How pound-cost averaging can help you take a long-term view

So, when can an investor commit money to the market? There are typically three options:

  • Invest it all immediately, and invest the rest as it is earned
  • Save it up, and invest a larger sum all in one go when the market conditions are right
  • Stagger it, and invest the money gradually over time

The third approach – investing a sum of money over a period of time, rather than all at once – is known as ‘pound-cost averaging’.

Imagine an individual invested £100,000 into a diversified portfolio. If the market falls consistently over 12 months, she might be left with a total portfolio of just £90,000. Her investment has reduced in value by 10% and she will have to grow her £90,000 by more than 11% to recover her portfolio’s initial value.

Compare that with a pound-cost averaging strategy.

Here, an individual invests £10,000 each month. As the market falls in value, it becomes possible to buy more assets at the lower price. In addition, assets invested later spend less time in the falling market.

Pound-cost averaging can work well in a falling market for the reasons above. Of course, if markets start to recover then an investor will be worse off than if they had invested your entire lump sum in one go. But, in a highly volatile market where markets are at their lowest for a decade, it can allow investors to get back into the market by spreading some risk.

The importance of having a plan

The most important thing you can have right now is a plan in place to reap any potential rewards if and when the market begins to recover.

Get in touch to find out how our advisers can help you. Email enquiries@blackswanfp.co.uk or call 020 3828 8100.

Please note

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

We aim to keep our clients up to date on interesting and relevant financial news.

You can sign-up to receive our monthly newsletter by email, even if you’re not yet a client. Sign-up using the form below.

Client testimonials

I have always found Black Swan to be caring and understanding of my quirky lifestyle. I always feel they try to get me the best returns while respecting my current needs.

Sally Muir

A client since 2011

We would be very happy to recommend the support and service we receive.

Valerie Locks

A client since 2010

I have always been completely useless regarding finance - thankfully our financial adviser is not! I've retired with far more than I ever expected and investments continue to grow safely. So - thank you!

Bernadette Jane Warner

A client since 2000

Very happy with the professional service I have received and feel a lot happier now with my finances put in order.

Martin Field

A client since 2011

Julie Cooper was recommended to me by a work colleague. She has been very helpful, professional and has explained everything well. I would definitely recommend her services to anyone else who are interested in a financial review.

Steven Rooke

A client since 2018

…Service has been first class.

Hugh Fells

A client since 2012

My face to face meetings with Rob Young and Jessica Lyons have always been very open and understandable. My questions have been answered clearly and I have left feeling that my financial matters are in good hands.

Sandra Jack

A client since 2000

[A] safe pair of hands in a complex financial world.

Gary Middlehurst

A client since 2003

A reliable company with good communication skills and good knowledge of the financial markets.

Alan Evetts

A client since 2014

Maureen Pembridge is a long-time trusted advisor to our family. The market might fluctuate but her attention to detail is consistent.

Linda Burnard

A client since 2000

I am pleased to recommend Julie as a trustworthy financial advisor. She explains financial jargon in plain language, and always listens carefully to my particular financial needs and has helped me make the best of my savings.

Carolann Samuels

A client since 2010

I have always been satisfied with the way that Black Swan has handled my account. And I have always found the staff very helpful whenever I need to call the office.

Robert Anthony Matthews

A client since 2012

An excellent personal service from a person I know and trust.

Michael Dalton

A client since 2010

I am getting a very good services from Black Swan, they have got my investments sorted out which was in a bit of a mess.

Roy Jakens

A client since 2012

A good, efficient team providing clear ideas to shape a winning strategy.

Adrian Michael Levenstein

A client since 2011

Black Swan is a company to be trusted, with friendly staff and professional advisors.

David Brian Jennings

A client since 2017

I have been with Black Swan for many years. I have never wished to change anything. They give a good straight forward service.

Martin Barrett Brooks

A client since 2010

Andy Peters has been invaluable in firstly combining several pension pots and then giving excellent investment advice. It has given us a great deal of comfort to know that our financial affairs are in such good hands.

James Guillum Scott

A client since 2014

I find my financial advisor easy to talk to and feel that she understands my lifestyle. She is always available for help when I need her and explains in words that I can understand.

Margaret Ena Glasgow

A client since 2000

Andy is a first rate Director, excellent communicator and leader.

Ross Perry

A client since

Black Swan Financial Planning and Andrew in particular, are very clever at working out how risk averse we are, and coming up with solutions that we feel comfortable with. We are happy in the knowledge that we can continue to enjoy a comfortable retirement. Andrew Peters is a very, very friendly person who is great to chat to and easy to deal with. He explains things very clearly in layman’s terms, and if we still don’t understand, he explains it until we do!

Alan & Jane Dyer

Clients since 2012

We have always found Rob [Young] to be very approachable and knowledgeable. We have every confidence in the advice given and feel comfortable with the decisions we’ve made. There are certain opportunities that we wouldn’t have known about if Rob hadn’t brought them to light, which makes the advice good value for money as far as we’re concerned.

Peter & Pauline O’Halloran

Clients since 2013

Rob [Young] is extremely knowledgeable. I knew nothing about the different types of trusts which will not only secure my income in retirement, but also leave a legacy for my children. I’m glad that I sought his advice when I did.

Sarah Wilson

A client since 2015

I am extremely happy with the service afforded to me by the company and my adviser Julie Cooper.

Geoff Coxell

A client since 2010

My wife and myself have been dealing with Black Swan for a number of years. We have met with different representatives from the company over the years and have found all very helpful in their own way. We met with James [Anderson] a few years ago and found him very helpful and knowledgeable. He keeps in contact with us on a regular basis. We find the Company information very helpful and we feel very secure with our finances.

Andrew Kirchen

A client since 2015

I have always found my adviser to be easy to contact, very professional in his approach, yet friendly and understanding. I have a sense of an experienced company behind him, really on the ball financially and with good standards.

B McBean

A client since 2011

Partner with the most reliable and experienced team of advisers

Enter your details & we'll be in touch to discuss your needs.
Alternatively, contact us directly and speak to a member of the team.

    Subscribe to our newsletter