Daily Mail - 17.08.2019

FTSE

100

during

crash

FTSE 100

gains

since day

before

fall

Return on

£1,000

if you

had kept

your

money

invested

THE REWARDS OF

STAYING CALM

Black Monday

1987

Dotcom crash

2000

Lehman Brothers

collapse

2008

-10.3pc

-18.5pc

-35.7pc

+123pc

+7.5pc

£5,933

£2,327

+35.2pc £1,993

Don’t panic: stick with

shares for the long run

Our guide to the

stocks that matter

TRUST WATCH

WHAT IS IT?

SHIELD Therapeutics is a phar-

maceuticals company that has

developed Feraccru, a pill that

treats iron deficiency in

patients who are intolerant of

salt-based iron therapies, and

who would otherwise need

costly injections at a hospital.

WHAT’S THE LATEST?

Earlier this year the company

published data showing Ferac-

cru was as effective as intrave-

nous iron therapies, and it has

gained approval to sell the

drug in the US. Its half-year

results show sales increased to

£2.6m in the six months to June

30, up from £495,000 during

the same period last year.

Losses narrowed from £8m to

£2.5m as well.

WHO BACKS IT?

The company’s main share-

holder is venture fund W Health

LP, with a 48.1pc stake.

WHY YOU SHOULD INVEST

The approval of Feraccru in the

US has opened the world’s

largest market up to Shield,

with an estimated 8m to 9m

patients suffering from iron

deficiency anaemia.

AND WHY YOU SHOULDN’T

The firm is still loss-making and

is yet to strike a deal with dis-

tribution partners, meaning it

cannot complete manufactur-

ing of its product yet.

WHAT IS IT?
THE Finsbury Growth & Income
Trust is managed by star stock
picker Nick Train’s firm, Lindsell
Train. It aims to offer investors
capital and income growth which
beats the FTSE All-Share index.

WHAT DOES IT INVEST IN?

Primarily UK-based companies
that are considered defensive
stocks. Some of its holdings
include consumer goods groups
Diageo, Unilever and AG Barr. Train
seeks out stocks that he believes
are undervalued and holds them
for the long term, regardless of
their short-term performance.

WHAT DO THE EXPERTS LIKE?

William Sobczak, of Kepler Trust
Intelligence, says the trust has

tended to outperform its peers

and more than doubled the

returns of the FTSE All-Share index

in the five years to March. Its

returns over the longer term have

been equally as strong, he adds –

it has beaten the markets in nine

of the past ten years.

ANY DOWNSIDES?

It is slightly pricier than average.

Its fees stand at 0.7pc, above the

0.6pc weighted average for UK

equity income trusts. Over ten

years that could cost savers with a

£10,000 nest egg more than £100.

Aug 2018 Aug 2019

950p

900

850

800

750

700

Finsbury Growth &

Income Trust

Pence RBS

Aug 2018 Aug 2019

250

225

200

175

Close:

182.15p

PUNT OF

THE WEEK

POPULAR

SHARES

THINGS were beginning to look

up for Royal Bank of Scotland.

The High Street lender, which

is still almost two-thirds owned

by the Government after its

bailout during the financial

crisis, reinstated its dividend

last summer following a dec-

ade of cost-cutting.

And the Treasury had begun

to sell down its stake again as

the bank’s financial health

improved, though it still

booked a massive loss when

offloading the shares.

But alarm bells have begun

to ring once more at RBS, as a

clutch of downgrades from

analysts this week knocked

investor confidence.

Number-crunchers at HSBC

and Macquarie both cut their

expectations for the lender,

while UBS, Goldman Sachs, Citi-

group and JP Morgan reduced

their target price for the stock.

RBS was also named the UK’s

worst bank in twice-yearly

customer satisfaction rankings

this week.

The pessimism will make the

job of its next chief executive,

widely expected to be senior

executive Alison Rose, a little

bit tougher.

But though RBS’s second

quarter was ‘disappointing’,

according to UBS analysts, the

stock has been oversold by

fearful investors and could

represent good value.

Why it pays

to keep your

nerve when

markets dive

as safer assets.
Economists pointed to ris-
ing long-term bond prices as
customers rush to buy them
as evidence a downturn could
strike in as little as six
months, prompting this year’s
biggest one-day fall in the US
Dow Jones index on
Wednesday.
The FTSE 100 and other Euro-
pean indexes were sent into a tail-
spin as well, after the release of
bleak economic data from China
and Germany.
But what does this mean for
small investors who are wondering
what to do with their holdings?
The important thing is not to
panic – and to remember that mar-
kets eventually bounce back, so
selling after a dip is often the worst
thing to do.
First, think long term. This even
applies to those nearing retire-
ment, because you are likely to
spend at least 20 years as a pen-
sioner. Joe Healy, investment
research analyst at The Share Cen-
tre, says staying calm and sticking
to a sound investment strategy is
the best approach.
Selling out during a falling mar-
ket can mean you miss out on both
share price growth and dividends.
For example, the Footsie plum-
meted 10.3pc on Black Monday in
1987 amid tensions in Iran.
But since then, the index has

surged – and it is now 123pc higher

than before the crash happened. If

you reinvested the dividends dur-

ing this period of growth, £1,000

invested on the eve of Black Mon-

day would now be worth £5,933.

During the dotcom crash of the

early 2000s, when overhyped tech

stocks fell to earth, the Footsie

dropped 18.5pc.

It took the market until 2015 to

surpass the peak of 6950.6 points

which was hit in 1999 before that

crisis struck, and the index is only

7.5pc above that level now.

But the power of reinvesting divi-

dends mean that even someone

who had put £1,000 in at the mar-

ket’s zenith before the new millen-

nium would now have £2,327.

The Footsie dropped 35.7pc in

the months after Lehman Broth-

ers bank failed in the financial cri-

sis. But it is now 35.2pc above its

position before the bank failed,

and £1,000 invested then would be

worth £1,933 now. ‘History sup-

ports the thesis that remaining

invested does prove to be benefi-

cial,’ Healy adds.

The type of investments you

choose during a downturn is just

as important, however, and mak-

ing sure they are diverse is key.

Healy suggests spreading portfo-

lios across stocks, bonds, cash and

funds that aim to generate returns

from a mix of assets.

Investments could include

actively-managed funds, which

are run by experienced stock

pickers who can make changes

when they feel markets are chang-

ing. But be wary of those dab-

bling in hard-to-trade assets, as

embattled fund manager Neil

Woodford did, as they can be

caught out in a market slide.

F

or those who prefer to

pick their own stocks,

doing so can become

more difficult when mar-

kets are volatile. This is why com-

panies with strong, stable cash

flows and healthy balance sheets

are seen as the best defensive

bets.

Among the stocks Healy says are

worth a look are British drug mak-

ers Glaxosmithkline and Astra-

zeneca. Pharmaceuticals is seen as

a relatively evergreen industry due

to huge demand for medicines

from the world’s ageing

population.

Another stock seen as defensive

is drinks juggernaut Diageo, the

owner of Johnnie Walker and

Guinness, though Healy says

investors should ‘drip feed’ any

purchases they make because the

stock is currently a little pricey

after a run of good performance.

Drip-feeding – or investing regu-

lar small amounts once a week or

month, rather than a lump sum –

is a good strategy in general for

riding out volatility. It reduces the

risk of bad timing and means

investors benefit from ‘pound cost

averaging’, where you get more

shares when prices fall, meaning

you reap a greater reward if they

pick up again.

Jim Cramer, CNBC’s investment

guru across the Atlantic, says it

would be a ‘big mistake’ to quit

the stock market completely. And

he warns: ‘Panic is not a strategy.’

Selling your shares is always a

tempting proposition when it

looks like markets are going

south.

But you cannot benefit from a

lucrative revival if you’re not

invested. In other words: Keep

calm and carry on.

Reviewing your portfolio is

always a useful exercise – but

sometimes the best course of

action is to do nothing.

A

UGUST is proving a vola-

tile month for global stock

markets. With fears grow-

ing that a recession is

around the corner, pan-

icked investors are ditching

shares and rushing to snap up

government bonds that are seen

DIRECTOR

DEALS

MOST SHORTED

SHARES BEING BET AGAINST

Kier Group 12pc

Thomas Cook 9.6pc

AA 9.5pc

Wood Group 8.7pc

IQE 8.3pc

NAKED Wines boss Rowan

Gormley was this week handed

control of £2.9m of stock in the

drinks retailer under a long-

term bonus scheme.

Around 1.1m shares

became unrestricted,

so the 57-year-old is

able to sell them,

though he had to

ditch 500,000 of these

worth about £1.3m to

cover tax liabilities.

At current prices

this leaves him

with £1.6m

of stock.

■

INVESTMENT

EXTRA

Expert tips and advice you

simply can’t afford to miss

by Matt Oliver

Daily Mail, Saturday, August 17, 2019
Page 109