The FTSE 100 has been on a roller-coaster ride since the Russian invasion of Ukraine. Littered with falling share prices today, London’s top index has struggled to remain above 7,000. But perhaps it’s testimony to the underlying strength of business that the Footsie has rebounded to 7,200 points at the time of writing.
We are still looking at a 2% fall over the past two years. After the big Covid-19 sell-off, could we face another crash? There could well be further turmoil should the war in Ukraine escalate.
I understand if people decide to sell their shares and sit out the global crisis, with their cash parked somewhere safe in the meantime. With the uncertainty of where things could go in Ukraine in the coming months and perhaps years, a flight to safety appears to be happening.
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As well as seeing falling share prices today, we also face a rising gold price. It broke through $2,000 per ounce in the first week of March. As I write, it’s dropped back a little to around $1,970. But it does looks like investors are prioritising safety again.
Here’s what I’m doing
Am I going to do the same? No, not a bit of it. The real suffering of people in Ukraine makes me feel a bit guilty being concerned about my own financial well-being. But then, I think it would be irresponsible for me to forget about my family’s fortunes.
The thing is, for more than a century, the UK stock market has beaten other forms of investment hands down. That’s a period covering two world wars, a Middle East crisis or two, and a number of oil price shocks. Yet shares in well-managed companies have come good over the decades. I reckon falling share prices are providing opportunities to buy into such companies at reduced prices today.
Great companies at fair prices
Warren Buffett famously said that successful investing is all about buying great companies at fair prices. So that’s what I will carry on trying to do. And I’m going to stick with my long-term strategy.
It is tempting to try to pick up fallen shares at bargain prices, in the hope of recovery. But a lot of people made that mistake during the Covid pandemic. They saw share prices of companies like International Consolidated Airlines and Rolls-Royce, which were most exposed to the crisis, collapse. And what goes down must come back up, right? Well, perhaps not. The past two years have shown how easy it is to get the timing wrong and lose out.
Low share prices today
So I am not going to buy companies like Polymetal, which have crashed under sanctions fears but are still trading. Yes, they might provide fat recovery profits. But there’s a risk of total wipeout too. No, I think it would be a mistake to switch my strategy to try to benefit from short-term trends.
That means I’m carrying on looking for quality companies that generate cash, are not hampered with debt, and pay good dividends. And I do think some of today’s fallen share prices offer exceptional value.
