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Investment expert: buy funds, not shares during crisis

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23/03/2020
Stock picking during the current crisis “could go disastrously”, an investment expert has warned.

Helal Miah, investment research analyst at The Share Centre, has urged private investors to buy funds, investment trusts or ETF index funds rather than individual stocks after the Financial Conduct Authority (FCA) requested that companies delay the publication of their preliminary financial statements for at least two weeks.

He said: “As a sign of the times, the FCA has requested all listed companies observe a two week moratorium on the publication of full-year results amid the chaos which means no further updates from the likes of AB Foods and the impact on its Primark division.”

Primark is one of a number of businesses to shut all stores as a result of the emergency measures announced last week by the government – but it does not have the fall-back position of an online offering.

Miah admitted that no further corporate updates makes his job of deciphering a company’s wellbeing “a little more difficult” but said the “pure fact that it is happening is a reflection of the unprecedented times we’re facing”.

The FTSE 100 was down another 5% this morning reflecting the increased pressure of a shutdown of the economic system around the world.

Miah said: “While last week it seemed the market was attempting to find bottom, it was always going to depend on the data coming through and this suggests that lockdowns will be needed in more countries.

“The markets could go lower and those investors with cash on the side-lines are best advised to drip feed into the market; however I believe buying funds, investment trusts or ETF index trackers will be the better way for now rather than trying to stock pick which could go disastrously.”

Over the weekend, the FCA said it had asked firms to delay publishing imminent financial statements because of the current “unprecedented events”.

It said: “Investors in capital markets rely on trustworthy information on the companies whose instruments they trade. The unprecedented events of the last couple of weeks mean that the basis on which companies are reporting and planning is changing rapidly.

“It is important that due consideration is given by companies to these events in preparing their disclosures. Observing timetables set before this crisis arose may not give companies the necessary time to do this.”

However, Russ Mould, investment director at AJ Bell, said delaying company results is not what markets need at the moment.

“What shareholders and analysts are looking for is comment from management on what they are doing to preserve cash and give their company every chance of coming out the other side of the crisis and be ready for the eventual upturn.

“In the absence of information, people will make things up.  This isn’t a positive step and has now got people posing the question of shutting down markets.”

 

 

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