With the FTSE 100 turning, this is what I’d do next

Here’s a plan to help you profit from the current stock market volatility.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The FTSE 100 index has been moving up all week and further upwards progress today, as I write, encourages me that we could be near the bottom of the correction that developed during October.

Really though, I’ve no idea what will happen next, of course. Maybe the FTSE 100 will reverse direction and undercut its October low. If you look at a chart for America’s Dow Jones Industrial Average, the pattern is almost identical to that of the FTSE 100 over the past month or so, which lends weight to the theory that wherever the US market goes, the London market will follow. I think that is certainly true of the big plunges, at least!

Volatility ahead

Successful US trader Mark Minervini tweeted this yesterday: “We are not out of the woods. You don’t repair a market correction in a day or two. To establish a reliable bottom, you need backing & filling and a period of consolidation… that’s IF the low has been made. Prepare for more volatility soon.”

Should you invest £1,000 in Diageo right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Diageo made the list?

See the 6 stocks

I like to take notice of Minervini because he has a truly remarkable record of making accurate market calls. However, none of this matters a jot to what I would do next. Whether the market rises or falls, I think the best course of action for me is to buy more shares and share-based investments.

Many individual share names are well off their highs at the moment, which means if the underlying quality of the business remains intact and the outlook for trading is okay, you’ll be getting better value than you would before the falls if you buy the shares now. But I think one of the most powerful approaches to investing is to add your money in stages. That way, you will get more for your money when share prices are down and you will not be investing all your funds in one go when the shares go up again.

Ironing out the bumps

That technique is known as pound/cost averaging, although Minervini would probably call it dollar/cost averaging. If you have a lump sum to invest, say £10,000, you could invest in stages of £2,000, for example, perhaps evenly spread over a year. That way you could end up ironing out some of the volatility that Minervini expects. However, I think pound/cost averaging works best of all when applied to regular monthly payments over a very long period of time. I also think it works best if you select a collective investment vehicle that removes single-company risk, such as a low-cost, passive FTSE 100 index tracker fund.

I can’t think of a better time to start investing, say, for retirement in an FTSE 100 tracker than ‘right now’. With a market correction in full swing and volatility back on the table, conditions are perfect for using pound/cost averaging to start the compounding process to build up your retirement savings. One attractive option is to open a stocks and shares ISA and contribute monthly payments into a FTSE 100 tracker fund held within the ISA. If you choose a tracker fund that automatically reinvests dividends, your investment will grow over time and pound/cost averaging will smooth the ups and downs of the index.

We think earning passive income has never been easier

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Kevin Godbold has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Is the Rolls-Royce share price still undervalued in 2025?

After massive growth in the Rolls-Royce share price, Charlie Carman considers whether the FTSE 100 aerospace and defence stock is…

Read more »

Investing Articles

How an investor could target a £43k lifelong passive income starting with just £5 a day

Harvey Jones says it's possible to build a high-and-rising passive income by investing small, regular sums in FTSE 100 shares.…

Read more »

Investor looking at stock graph on a tablet with their finger hovering over the Buy button
Investing Articles

£10,000 invested in Lloyds shares on 7 April is already worth…

After a dip in early April, Lloyds shares are back to their 30%+ year-to-date gain in 2025. And analysts are…

Read more »

US Stock

What I’d look to buy as the US stock market heads for the worst month since 1932

Jon Smith sifts through the US stock market to try and find some ideas that have fallen in value recently…

Read more »

Growth Shares

Prediction: I think £1,000 invested in this UK stock could double by 2030

Jon Smith runs through a FTSE 250 stock with a market cap just over £1bn that he feels has the…

Read more »

Investing Articles

With £10k in savings, here’s how an investor could target a second income of £500 a month

£10k in savings could be the foundation needed towards a powerful second income. Our writer details some steps necessary to…

Read more »

Asian man looking concerned while studying paperwork at his desk in an office
Investing For Beginners

£1k invested in the FTSE 100 on ‘Liberation Day’ is now worth…

Jon Smith talks about the volatility in the FTSE 100 in the weeks since the tariff announcements and flags up…

Read more »

Long-term vs short-term investing concept on a staircase
Investing Articles

Barclays’ share price is down 7% from March, so is now the right time for me to buy?

Barclays’ share price has dipped recently, which could mean a bargain to be had. I took a deep dive into…

Read more »