So you’ve been watching the news, and know all about the stock market crash that has been triggered by the coronavirus.
You understand enough about investing to realise that the best time to buy the FTSE 100 is at moments like these, when share prices crash and are cheaper. That way you can pick up top UK blue-chip stocks at reduced prices, in this case almost a third cheaper.
You also know that if you invest inside a Stocks and Shares ISA, you can take all of your capital gains and dividend income free of tax, for life.
You know all these things. The question is, what do you buy?
Time to buy a FTSE 100 tracker
If you are an experienced investor, you probably have a watchlist of FTSE 100 stocks that you want to snap up during a stock market crash. If so, go ahead. You know what you need to do.
Others who are relatively new to investing may be baffled by the choice of stocks available. They may be wary of buying individual companies, because of the added risk. Lots of people think investing is complex, and aren’t sure whether it is for them at all.
If you tick any of these boxes, then I have a simple suggestion. Simply buy the entire FTSE 100 in one swoop, using a low-cost tracker.
If that sounds easy, well actually, it is. Index-tracking funds keep things simple, by dispensing with an active fund manager and their hefty fees. Index-tracking funds are built for a crash like this one.
Easy way to play the stock market crash
Index trackers simply follow markets up and down, wherever they may go. In the longer run, history shows this should be up. Trackers will also pay out all the dividends on the index, which you can reinvest back into your fund for further growth.
They have two advantages over active funds. First, history shows that every year, three-quarters of fund managers underperform the market, while trackers never do. That means in the longer run, you are more likely to come out on top.
Second, trackers have much lower charges, with no upfront fees and annual underlying costs of as low as 0.6%. This means that nearly all the growth and dividends they generate goes to you, rather than the fund manager.
Exchange-traded funds (ETFs) such as the iShares Core FTSE 100 ETF and Vanguard FTSE 100 ETF will do the job, as will unit trust tracker HSBC FTSE 100 Index. Start with £1k, if you like, to limit risk. Then add more when you can.
Put your £1k to work
You can buy these trackers on a low-cost investment platform, inside a Stocks and Shares ISA, in a matter of moments. Once you’ve done that, wait for the stock market crash to sort itself out, while reinvesting your dividends for growth.
The FTSE 100 will recover. This is the simple way of profiting when it does.
