FTSE 100 in a Bear Market: Should You Be Worried?

Instead of selling stocks, the market downturn could be considered as an opportunity to buy some high-quality companies at a cheaper cost - unless you are approaching retirement

Karen Kwok 21 January, 2016 | 4:47PM
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The FTSE 100 has fallen by more than 20% since the record high reached last April, meaning it is officially in bear market territory. The tumbling oil price is the main driver of the market rout, as oil and mining stocks make up a significant part of the blue chip index. And the dwindling price of oil is not just threatening equities; the European Central Bank announced today that interest rates will remain unchanged across the Channel as oil threatens their inflation outlook.

However despite the market selloff, investors are advised not to panic and instead to focus on fundamentals.

“Those long-term investors who have suffered large falls need to be careful not to panic sell, as this is part and parcel of stock market investing and they will have time on their side to recover losses. Careful monitoring of their pension and gradual de-risking may be helpful,” Tom McPhail, head of retirement policy at Hargreaves Lansdown said.

McPhail warns that the recent fall could be more serious for those close to retirement, or drawing down their pension who do not have time to recoup losses.

A Buying Opportunity?

Instead of selling stocks, the market downturn could be considered as an opportunity to buy some high-quality companies at a cheaper cost. Investors should remain calm and keep their cash ready for any chances coming up. As always, investors should hold a diversified portfolio across asset classes, sectors and regions which will minimise the risk of losses.

Investors who did not solely invested in FTSE 100 may have managed rather better. “The average mixed asset pension fund has fallen 9.4% over the time the FTSE 100 has dropped by 20.1%,” McPhail says.

Across the FTSE 100, major retailers Tesco (TSCO) and Sainsbury (SBRY) have had the highest percentage fall of share price in four days, both dropping 5%.  Imperial Tobacco Group (IMT) fell 3% in two days. Compass Group (CPG) has lost 4% today alone. 

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Compass Group PLC2,231.00 GBX1.27Rating
Imperial Brands PLC1,819.00 GBX2.54Rating
Sainsbury (J) PLC269.00 GBX3.94Rating
Tesco PLC291.10 GBX3.45Rating

About Author

Karen Kwok

Karen Kwok  is a Reporter for Morningstar.co.uk

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