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The FTSE 100 crashed back below 7,000 this week. Here’s what I’d do

·3-min read
Stack of British pound coins falling on list of share prices

FTSE 100 sees £48bn wiped off value as fresh inflation fears prompt global markets plunge.” That’s what Sky News said this week. And it wasn’t alone, with similar headlines splashed around most news outlets. The London index did dip below 7,000 points again, reaching a low of 6,823 on Thursday. But is there any need for panic or drama? And how does it fit in with the longer-term scheme of things?

The Footsie’s dip saw it hitting a three-week low, it seems. The lowest it’s been in three weeks, gosh! I don’t know about anybody else, but I’m really not interested in what’s been happening to the stock market over anything as short as three weeks. Well, except for the possibility of short-term dips offering me better buying opportunities if any of my favourite shares fall in value.

Speaking of falls in value, I get ever so slightly irritated by headlines telling me how many billions have been knocked off the FTSE 100. It makes it sound like investors have lost huge sums of money. And it bolsters the age-old fear that investing in shares is a horribly risk business akin to gambling. Where are the headlines that say: “Modest amount of value added to FTSE 100 stocks today, in line with the long-term average“?

Where did the FTSE 100 value go?

I even had someone ask me what it means. “Surely everyone still owns mostly the same shares, and there’s been no £48bn changing hands, has there?” He was quite right. But what did cause the FTSE 100’s ups and downs this week? We were first told that it’s all down to inflation fears.

Investors around the world, it seems, saw the latest US inflation figures and were spooked. If inflation picks up, interest rates can soon follow. And that, erm, maybe does something to the long-term value of shares? Higher interest rates might actually make cash investments ever so slightly more attractive. Perhaps slightly more attractive than rat poison, in my view, given how shares have outstripped cash investments over more than a century now. But of course, I’m talking as a committed share investor here. Others may see more appeal in cash.

By Friday, it seems those very same investors had overcome their fears from just a day previously, and were buying back in to shares. The FTSE 100 ended the week above 7,000 again, at around 7,045 points. So what am I going to do about all this?

Just carrying on as usual

In a word, nothing. In 2020 we experienced one of the worst FTSE 100 crashes that hopefully most of us will ever see. We saw some share prices fall 90% and more in the early days of the slump. But a lot of those have already recovered much of their falls. Are any of us who have been through all that going to be the slightest bit concerned about movements of a couple of percent in any one week?

I’m not. I’m just carrying on saving my cash and investing it every time I have enough for a share purchase. And I’ll continue seeking and buying shares in good companies that I hope will see me through to a comfortable retirement.

The post The FTSE 100 crashed back below 7,000 this week. Here’s what I’d do appeared first on The Motley Fool UK.

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Views expressed 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.

Motley Fool UK 2021