Stock market veterans: 'Falling markets present buying opportunities'

28 January 2016

Investors have had a turbulent start to the year with the FTSE 100 index of the UK’s leading company shares falling. Reasons for the fall include tumbling oil prices and the slowdown of the Chinese economy.

Many investors will be feeling too scared to buy in case the market falls further and may even be thinking of selling up.

But some of the longest serving managers of investment companies – the oldest type of investment fund - explain that falling markets can lead to cheap opportunities to buy investments.

Speaking to the Association of Investment Companies (AIC), Angela Lascelles, manager of Value and Income Trust, says: “Current market conditions, where fear is causing indiscriminate falls in share-prices, provide opportunities to buy high quality companies on attractive valuations.”

While Austin Forey, manager of JPMorgan Emerging Markets Investment Trust, adds: “Markets in decline and things getting cheaper often presents a number of interesting buying opportunities.”

See our guide to How to get investing in 2016 if you’re thinking of taking the plunge. 

But Peter Spiller, manager of Capital Gearing Trust plc warns that investment company discounts remain “tight”. This means that investment companies aren’t trading at big knock down prices. He says: “Today discounts remain as tight as they have ever been, suggesting investors are not scared and are resisting selling.

“Unless the US goes into a recession it is likely that buyers will re-emerge before long, notwithstanding the fact equities remain materially overvalued.”

‘Our strategy doesn’t react to short-term noise’

Mr Forey adds that investors also shouldn’t underestimate the long-term game. He says: “Volatility [the extent to which the stock market rises and falls] is tough but as a long-term investor, our investment strategy does not react to short-term noise. 

“We like to keep things for a long time and focus on buying stocks that will survive, keep growing and maintain their competitive edge.

“While emerging markets are going through a slow grind, it doesn’t feel like a crisis. In spite of the volatility, we’re still seeing really strong companies outperforming their competitors at a really good rate.

Ms Lascelles adds that low oil and commodity prices will “encourage growth” in the developed economies once the turbulence has passed.

See our Stock markets spooked: should you care? feature for more on this.


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