FTSE 100 index nears record high: rein in your emotions

5 October 2016

The FTSE 100 index of the biggest companies traded on the London Stock Exchange almost closed at a record high yesterday. It ended the day at 7,074, just below its previous highest close of 7,104 on 27 April 2015. However, at the same time, the pound plunged to a new 31-year low against the dollar.

So while we won’t have as much to spend on our holidays abroad, our pensions and investments are looking healthier than they have for a while. This is because the many international companies whose shares are traded in the UK have benefitted from the fall in the pound since the Brexit vote. Profits earned abroad by multinationals such as drugs giant GlaxoSmithKline and major mining companies are worth more when converted into sterling.

If you’d put your money into the stock market after the Brexit vote on Monday 27 June when the FTSE 100 index closed below 6,000, and took profits yesterday you’d be sitting on an 18% gain. Hindsight is a wonderful thing though – here’s a piece from earlier this year on why it’s best not to time the market. Most investors, and particularly beginners, will find that they get better results and more peace of mind by drip-feeding their money on a regular monthly basis into the stock market. 

Also, at times of market highs, the smartest investors know not to get carried away with their emotions. To be a successful investor, you must buy low and sell high. Unfortunately, most people allow their emotions to get the better of them and instead, they buy high and sell low. For more on this read The emotional journey of the (not so) smart investor.