- The coronavirus effect is driving down prices across the board
- Not all companies are as badly hit as their share prices suggest
- Look for long-term value and carry out research to get the timing right
During any financial crisis, it is easy to panic and make short-term decisions. However, investors would do well to remember that opportunities exist in the market when prices are falling.
Many people will turn to the safest options, such as government bonds, when they sense fear in the air. Others may decide that now is the perfect moment to be bold and get hold of some cheap shares.
Look at long-term value
The first step is to stick to established investing principles. Look for long-term value on shares that are currently under-priced. Many stocks have fallen despite the fact that the coronavirus situation isn’t really affecting the company.
Communication, streaming services, supermarkets and technology are all areas where the drops have been larger than is justified. In some cases, the health alert doesn’t affect them. In others, it is – to put it bluntly – good for business.
For example, IBM has fallen from $135 (£114) at the start of the year to under $102 (a little over £86) at the time of writing. Doesn’t it look as though there is some value to be had here in the long term?
In the same way, BT has fallen from £196 at the start of January to £127. The Vodafone Group is down from almost £148 to £109. These are shares that have been dragged down by a collapsing market but that should rise again in time.
In general terms, you should stick to blue chip shares if you are planning to invest for retirement purposes. Choose shares that are generally steady and offer a good dividend.
Shares to be wary of
Not every company will survive this crisis. This is why the travel and entertainment industries have been savagely affected on the market. We simply don’t know yet how many airlines, hotels and restaurant chains will go under.
Look at the example of BA. The British Airline Pilots’ Association confirms that BA has told them of impending job losses, with three quarters of flights to be cut from April.
TUI has seen its share price plunge after it announced the suspension of most of its travel and tour operations over the world.
Companies like this may very well bounce back once the coronavirus crisis is over. Maybe millions of people will take a holiday once things settle down. There is simply no way of knowing yet whether this will happen or if the firms will go bust before then.
Timing is crucial
Timing is always crucial in ant type of stock marketing investing. Even more so when you are looking to benefit from cheap prices in a depressed market. Get it right and you could pick up a bargain that you keep in your portfolio for years to come and make lots of money on.
This means keeping a close eye on the news, to help you try to predict what happens next in each industry. We are in uncharted territory here, but there are going to be plenty of investors who make a fortune once prices rise again.