Stock markets have been bumpy for quite some time now, especially since the start of the COVID-19 pandemic. However, predictions of an economic recovery could mean that now would be the right time to invest in stocks and shares.
Today, we will look at whether or not it is a good idea to invest in shares. We will also discuss if we can predict a stock market crash this year, the best stocks to invest in right now and some helpful tips for investing during uncertain times.
Is now a good time to invest in the stock market?
While the future of some businesses looks great, we can’t say the same for all the companies. So, it all really comes down to what you invest in. Make sure you always do enough research before you decide to invest, especially if you are buying individual shares. Never invest in a company just because a friend, a family member or a colleague said you should invest.
There are quite a few reasons why investors are starting to feel hopeful about the stock market this year. For instance, success in the roll-out of COVID-19 vaccines could mean that we could see a massive increase in trade, spending and movement. Closed industries, such as travel and entertainment, are now starting to reopen.
Moreover, it is expected that takeovers will continue and this will provide investors with more opportunities to make profits. For instance, Morrisons shares rose 30% after a US private equity firm made an offer to buy the supermarket group for £5.5 billion. Other industries which are relatively new, such as biotech, e-commerce and fintech, have thrived during these uncertain times and it is expected that these will continue to grow.
However, there are also a couple of reasons why investors might feel cautious about the stock market in 2021. For instance, you might have already heard about the new strains of the coronavirus. Moreover, Brexit and there is a possibility that leaving the EU will have a negative impact on the stock exchange market.
Can we expect a stock market crash in 2021?
A stock market crash refers to a sudden and significant drop in the price value of stocks. This often causes stock market speculators to panic and sell their shares because they fear that the price value may fall further which could cause them to lose more of their investments.
In recent weeks, the FTSE 100 share price, which measures the performance of the largest UK companies by full market value, has been reaching new skies. However, it is worth noting that when share prices rise rapidly, there is always a risk that they could fall just as quickly.
Since slumping in March 2020, Stock markets have already risen a lot and this could mean that they are due a fall. Stock market crashes can come out of the blue and the cause only becomes apparent later on. But there looks to be limited possibilities of a big crash with the global economy opening up as the year progresses.
The truth is that no one can guarantee whether or not we will see the stock market crash in 2021. All that investors can do is assess which factors could have an impact on the stock market.
Tips to invest during uncertain times
Investing during such uncertain times can prove to be a challenge for a lot of investors, especially those who have little knowledge and experience of the stock markets. If you are new to investing, you might want to read about how and why you should invest in the stock market. Visit Buy Stocks UK to learn more about buying and investing in stocks.
There are a few simple rules that you should follow when it comes to investing during a financial crisis. Try to stay calm. We understand that the pandemic has stirred up a lot of emotions, but it is important for investors to stay rational about their investments.
Remember that investing is a personal choice. Your aims should be realistic and they should depend on your objectives, needs, circumstances and tolerance. Many successful investors have made it clear that the key to success is diversification.
Moreover, you should look to invest with ISAs and all the profit that you make will be tax-free. With a lifetime ISA, and also a pension fund, the government will usually add extra funds whenever you make big enough transactions.
If the markets experience a fall, you can buy shares and stocks for cheap which could help smooth out your returns. Once the markets recover, you will realise you made the investment at the right time.