The categorisation of Covid-19 as a global pandemic certainly sent shockwaves throughout the global marketplace, with the FTSE 100 crashing by a third from a peak of 7,634 in mid-January to below 5,000 on March 23rd.
Despite a subsequent and sustained rebound throughout Q2 and Q3, experts are now predicting a steep correction and further crash as the threat of a second wave of infections rises throughout the world. With this in mind, what are the best sectors to invest in and why are they poised to deliver a viable return?
Why are Stock Options Still Viable in 2020?
In simple terms, the stock market crash of March undermined and devalued a number of high-profile shares, without challenging their status or profitability in the long-term.
This trend was best observed amongst tech stocks, with relevant indexes such as the Nasdaq Composite tumbling by more than 4% recently and yet to scale their pre-pandemic highs. The S&P 500 also declined by 2.8% last week, as tech stocks faltered and saw their value proposition falter.
Despite this, the big-tech market and its individual stocks are fundamentally strong and well-established, which means that such equities will once again grow in value once normal market conditions are restored.
This creates a small but tangible window of opportunity for investors to buy variable cap stocks at a significantly reduced price, before selling these on for a profit in the future.
Sectors and Caps – Picking the Right Investments
Of course, not all sectors and markets have been created equal, which is why some have performed significantly better than others during the last six months.
For example, supermarkets and e-commerce brands have achieved huge growth since the start of the pandemic, with the virus thought to have added £5.3 billion to online sales in 2020 so far. Both of these of these sectors are also poised to deliver growth in the long-term too, so they’re ideal for investors with a more patient outlook.
Some technology markets have also thrived during the coronavirus outbreak, particularly those based in remote communication. Take Zoom, for example, which has forecast a potential 300% revenue increase in 2020 and represents the ideal short-term option.
Beyond this, you may also decide that midcap stocks are ideally suited to the current investment climate, with these entities having performed demonstrably better than others since the FTSE 100 crash on March 23rd.
This is part of a wider and more historic trend too, with dedicated research showcasing that midcap stocks have also performed consistently better than others during periods of ‘systematic risk’ since the mid-1990s.
As a result of this, investing in mid-cap stocks (which boast an average market cap of between £2 billion and £10 billion) is a great way of optimising profits and minimising risk during significant peaks and troughs.
Choosing Equity Funds Over Indices and Individual Stocks
One of the best ways to target mid-cap stocks is through an equity fund, which offers considerably less risk and higher potential profits than both indices and individual shares.
The reason for this is simple; as such funds are naturally diverse and feature multiple holdings from an array of carefully selected markets, while they’re also carefully managed and directed by skilled managers such as Downing’s Rosemary Banyard.
With this example, you can also access a fund that’s focused primarily on small and mid-cap stocks, while simultaneously targeting UK stocks that are capable of delivering sustained and tangible returns.
Of course, the key is to identify the right equity fund to suit your risk profile and outlook, while also seeking out an option that’s tailored to your profit expectations.