Where To Put Money Invest If Market Crash Coming

Investors have been on something of a bumpy ride since the onset of the pandemic.

The latest dip in the road to recovery has come in the wake of the emergence of Omicron, a new Covid strain, which saw investors running for the hills.

So is now a bad time to buy shares, or are there opportunities to be had while others are fearful?

In this article we set out:

Whether you should invest in shares now
Will the stock market crash in 2021?
What are the best stocks to invest in right now?
Eight things to consider before buying stocks
Tips for investing during uncertain times

Is now a good time to buy shares?

It all depends on what you purchase. While the future of some companies look positive, the same can't be said for all businesses.

It's important to do your research into each company you buy. Listed companies release their financial results which can give you a picture of the health of the company.

Also bear in in mind that some sectors are fared better than others during the pandemic. Broadly speaking, technology companies have done well while travel firms have suffered.

Remember:

Don't buy shares in a company just because someone said you should (always do your own research first)
Selecting and monitoring individual shares is time-consuming
You can buy investment funds or use a robo-adviser so that an expert can do all the hard work for you

If you're new to investing, you might want to read this first.

Why has the stock market dropped?

Around £72 billion was wiped off the value of the FTSE 100 on 26 November. The 3.6% fall is the worst one-day drop for the index since the onset of the pandemic and is due to fears of a new Covid variant.

Travel restrictions have been brought in across the globe after the new strain, Omicron, was identified first in southern Africa. Airlines and other travel companies have been particularly badly hit.

Is now a good time to invest?

Reasons to feel hopeful about the stock market in 2021/2:

Successful vaccination roll-out could lead to an increase in movement, trade and spending
Closed industries reopen (think travel and entertainment)
Takeovers will continue
New industries: technology, e-commerce and biotech have thrived during the pandemic and will continue to grow
Low interest rates will encourage people to spend or invest

Reasons to feel cautious about the stock market in 2021:

Fears over new strains of the coronavirus as we have seen with Delta and Omicron
Short term increasing unemployment and ending of government support schemes
Stock markets have already risen a lot since slumping last March at the start of the covid-19 pandemic, which may mean they are due a fall
Brexit and the impact that leaving the EU will have
The US central bank is set to unwind its emergency purchases of US corporate bonds, signalling a further move away from support of the bond markets and other pandemic support measures

Crashes can come out of the blue and their causes only become apparent with hindsight.

But with the global economy opening up as the year progresses, there looks to be limited catalysts for a big crash.

Find out more about how to invest during a recession.

Will the stock market crash in 2021?

A stock market crash is a sudden and significant drop in the value of stocks, and therefore their price

Some stock market speculators panic and sell their shares fearing that if the price falls further, they could lose even more of the money they invested.

No one can accurately predict whether or not the stock market is going to crash. All you can do is evaluate which factors will influence the stock market and your particular investments.

The FTSE 100 share price, which measures the performance of the largest listed British companies, has been reaching fresh highs. But when stocks rise rapidly, there is always a danger that they could fall just as quickly.

If you are new to investing you might want to read our beginner's guide.

"Research has routinely shown that time in the market is more successful than timing the market so I would caution investors against trying to pre-empt any potential falls."
Claire Walsh, independent financial expert

What are the stocks to invest in right now?

We have listed some companies below that might be worth considering, or avoiding, though we always recommend that you do your own research before buying shares.

Rolls Royce: the company makes engines for planes that embark on long-haul flights. With so many planes being grounded during the pandemic, the Rolls Royce share price suffered. However, things are looking more positive after it swung into profit.
Avast: the cybersecurity group could be bought by an American rival. Analysts valued the FTSE 100 company at £7.2 billion and suggested the business could end up in a bidding war. The news prompted the Avast share price to climb 17%.
Seraphim Space investment trust: raised £180m when it made its debut on the London Stock Exchange in July 2021. The trust invests in a pool of space technology companies.
Wise: its share price has been on an upward trajectory since its listing on the London Stock Exchange in early July. Previously called Transferwise, it converts money into different currencies, but it has plans to branch into other areas of financial services.
Nissan shares look interesting given its plans for an electric battery factory in Sunderland that is set to be worth £1bn.
BT: French telecoms company Altice bought a 12% stake in BT. The announcement on June 10 was seen as a vote of confidence in the company and has pushed the BT share price up.
Blackberry: no longer makes smartphones, but it's thought that the company's cybersecurity software gives it a lot of potential going forward. Bear in mind that some technology stocks look a bit expensive at the moment, so you have to weigh up whether the premium price is worth it.
Zoom: the darling of the pandemic, the Zoom shares peaked in October 2020, up almost 750% on March 2020. It has fallen back almost 50% since then and had some disappointing mid-year results, however many investors are interested in Zoom's ambition to consolidate it's leadership position with more investment and M&As.
Unilever share price dropped almost 10% during the summer wiping £11bn off it's value. There is speculation that the consumer goods giant could be shaken-up and broken up by investors.
Facebook: The spate of bad news stories around the social media giant has impacted on the Facebook share price in recent months. The slump means that now could be a good time to buy, although you need to be mindful of the risks that still face the company.
Visa share price fell 5.2% on 18 November after Amazon announced a ban of their UK-registered credit cards in a row over the fees that customers and retailers are charged on purchases.
Hochschild mining (HOC) share price nosedived at the end of November after news that the Peruvian government would close two of its mines for environmental reasons.
JD Sports share price rose after the company's five-for-one share split at the end of November. JD is now valued at £11.2billion, and after Tesco is Britain's second most valuable shops group.
Pfizer shares gained around 10% in premarket trading following news that its experimental Covid-19 antiviral pill reduced hospitalisation and death by 89%.
Amazon share price has had a volatile 2021, with some investors worried about the short term challenges, for example, accusations of anti-competition practices and big investment in logistics. However the company emphasises long-term growth.
Evergrande share price hit a record low in the first week of December as it the world's most indebted property developed, was downgraded to "restricted default" by rating agency Fitch
Bidstack share price – rose 125% following news on 10 December of a deal with a global "AAA Game Publisher". The native in-game advertising group's shares fell back 10% as the market still awaited more information a few days later on who the publisher is.
Boohoo share price has fallen 45% over 2021 with investors still concerned about the fashion company's environmental, social and governance credentials, as well as ongoing supply chain issues affecting the sector.

If you'd like to know more about today's big investment trends, check out our guide here.

The ups and downs of the market

Beware of market volatility at the moment. The FTSE 100, which measures the performance of the biggest companies in the UK, has moved upwards over the past year but it has been a bumpy road to get there.

Netflix, Deliveroo, and Peloton during the first year of the pandemic are good examples of the fluctuations in share prices that you need to consider when investing.

The streaming service, food delivery company and exercise equipment maker were seemingly three of the corporate winners of the coronavirus outbreak.

Upsides

Netflix gained 16m new subscribers during 2020, revenues of $7.16bn in April 2021 and predicted a better second quarter to the year
Deliveroo has benefitted from a $575m Amazon investment, increased customer engagement
Peloton shares gained 400% through 2020

Downsides

But none of these companies are immune to the negative affects of the pandemic or other headwinds:

Netflix
- Production of many new Netflix shows have been halted
- Competition in the sector notably from the newer players like Disney+
- Lower than expected sign-ups in the first quarter of 2020

Deliveroo
- Yet to turn a profit: while its revenues grew 54% to £1.2bn last year, the company made a loss of £223m
- Deliveroo shares fell 30% in the first 20 minutes of its listing on the London Stock Exchange on March 31 2021
- Reliance on gig-economy workers at a time when they are being handed more legal rights

Peloton
- Peloton share price dropped 53% from January high in early May 2021
- A series of accidents with equipment led to the death of a child and the company announced a massive product recall
- A victim of its own lockdown success, with supply chain problems
- Future is uncertain with gyms reopen

You might want to read more in our article How to buy shares.

Despite optimal conditions during the pandemic Deliveroo has failed to deliver

Eight things to consider before buying stocks

Here are eight things to consider:

1. Volatility

Equities can be very volatile when there is uncertainty and could pull back a lot if new variants of COVID are discovered that evade the vaccines.

2. Context is everything

Just because something is not cheap it does not make it unattractive. We are in for another decade of near zero interest rates, low growth and low, or no, inflation. In this environment businesses in growing markets with access to cheap money tend to do well and what you pay now for them may look cheap in 10 years time.

3. Not all equities are the same

Some which look cheap now are in fact expensive and will probably fade away over the next few years.

4. Are you happy going against the crowd?

Investing when people are fearful and there's a high amount of uncertainty is understandably daunting.

Consider whether you believe we'll be in a better situation by the time you'll want the money. Things can always get worse before they get better.

5. Investing is for the long-term

Remember a "loss" is only a loss when you sell the investments. Your decision depends on how quickly you'd need the money and whether you understand that shares can fall as well as rise. Can you stomach losing money should markets continue to fall?

6. Inflation

With interest rates at a record low of 0.1%, a cash savings account won't help your money grow.

When you allow for inflation, which measures the rising cost of living, you're almost guaranteed to be worse off.

7. Use a stocks and shares ISA

It's a good idea to hold your shares in an ISA to protect your earnings from dividend tax and capital gains tax.

We explain: How are shares taxed?

8. Buy a pool of shares

If you would rather invest in a basket of shares rather than choosing them yourself, you could invest in a fund.

Some funds simply track a stock market like the S&P 500, which is an index measuring the biggest companies in the United States.

Top rated self-invested stocks & shares ISAs

Barclays

Investment ISA

Close Brothers Asset Management

Close Stocks & Shares ISA

InvestEngine

ISA

Fintech, renewable energy, gaming and leisure are stock market sectors worth keeping an eye on

Why should you drip feed?

If you are thinking what shares to buy now, remember it is almost impossible to time the market perfectly to make the most of your money.

For example:

Invest when markets are rising, you may have missed the boat for the best returns
Invest when the markets falling, and they could fall a lot further still

Drip feeding your money in slowly, rather than investing it all in as one lump sum, removes this tricky decision.

This not only encourages a good savings habit. It smooths the investment journey by buying more units when markets are lower (known as pound cost-averaging)

Find out more: Coronavirus: how to protect your investment portfolio

How do you get dividends?

Dividends are what a company pays to shareholders when it makes a profit.

The coronavirus pandemic has impacted on the cash position and growth of a number of businesses, which has impacted on the amount shareholders have received in dividends.

Throughout 2020 the UK's biggest banks RBS, Barclays, Santander, HSBC, Lloyds, and Standard Chartered all suspended dividend payments and share buybacks.

Dividend-paying stocks are often a popular choice to include in your investment portfolio. But remember, the dividends you earn might be subject to tax.

Find out more: How are shares taxed?

Four tips to invest during volatile times

Here are our four golden rules when it comes to investing during a financial crisis:

Stay calm
The pandemic has stirred up a lot of emotions, but stay rational about your investments.
Consider your aims
Investing is personal. You choices depend on your circumstances, objectives, needs and risk tolerance. The key is diversification
Use your tax reliefs
You can invest tax-free with an ISA. With a pension, and also a lifetime ISA, you get an instant uplift as the government will usually add some extra cash whenever you pay in more money. Here is a pensions guide.
Drip-feed your money
If the markets go down further you're buying at a cheaper level and it could help smooth out your returns, with the hope they recover and grow in the longer term.

Find out more: our Beginners Guide to Investing and How to retire early.

Best investments right now

Making the most of a buying opportunity often means looking for firms that are well placed for any potential structural shifts.

Fintech and payments sector: companies that help people work remotely or pay for goods or services are worth investigating.
Ecommerce: could surge given the fear factor of shopping in crowded malls and supermarkets.
Renewable energy: consider sectors that will do well regardless of the pandemic. A rapid fall in the cost of building renewable energy projects has happened at the same time as a greater awareness of the climate crisis. This is a powerful trend that Covid-19 will be hard-pressed to derail. These assets provide reliable income streams, which are often backed by government subsidies. Read our guide to ethical investing.
Online gaming: these businesses were among the most resistant to the market sell-off.
Banks: depending on the duration of the coronavirus outbreak, the "battle-hardened" banks could be worth watching. Remember, banks have been through the 2008 [financial] crisis and may therefore fare better in an economic recovery than markets anticipate.
Leisure sector: after months of isolation, people want to go out and spend. Restaurants and pubs with the strongest balance sheets might fare very well. Ideally, they will experience a surge in consumer spending at a time of reduced competition. And they will have the opportunity to pick up cheap distressed assets from rivals that went bust.

Find out more: Investment trends of 2021.

Should you buy record cheap British stocks?

One of the world's biggest investment banks JP Morgan has been telling investors to buy British stocks now while they are cheap.

The investment firm had taken a bearish stance on British stocks since the EU referendum in June 2016. When compared to companies in the US and Europe, UK shares have underperformed since the Brexit vote.

But JP Morgan has said there are a few things that could change the fortunes of British stocks:

UK shares have strong dividends
Stock markets like the US and China are expected to struggle maintain their momentum going forward, paving the way for the UK to outperform
UK stocks have tended to rise in the months after an interest rate rise, which is expected to be on the cards soon

If you're looking to buy stocks, you might want to open an investment ISA. Find out why Fidelity has been given top marks in our independent ratings.