The Russian economy has fallen into turmoil as the West applies economic sanctions, the value of the ruble plummets and global companies sell their stakes in Russian companies.
Markets fell as Russia’s invasion of Ukraine spooked investors around the world.
Many British savers suffered a blow to their Isa and Sipp portfolios, with the FTSE 100 stock index falling from 7,498 points on Wednesday February 23, the last trading day before the invasion of Ukraine, to 7,397 in start of the session this morning. This represents a market decline of 1.3 pc.
BP shares were among the fallers after announcing it would sever ties with Kremlin-controlled energy giant Rosneft.
The value of the ruble collapsed against other currencies following the increase in sanctions. This caused increased volatility in Europe and America.
Although investors should not panic and make sudden changes to their portfolio, there are stocks that will protect them against sharp swings in the stock market.
Should I buy foreign currency?
The pound lost ground against the US dollar amid escalating tensions in Europe. The dollar is generally seen as a safe haven in times of market volatility, but do-it-yourself investors should avoid trading currencies, Lowcock said.
“It’s a notoriously difficult thing to do, and even professional investors often avoid it,” he said.
“Instead, I would recommend looking at a fund such as JP Morgan US Equity Income, whose holdings in America will give you some allocation to the dollar. This fund is also less biased towards “growth” stocks which are out of fashion these days, and has more of a defensive quality. »
Engaging in currency speculation is risky business given the unpredictability of global currency movements, Khalaf added.
Should I sell my investments and hold cash?
As stocks begin to fall, some investors may be tempted to pull their money out of the markets and hold their wealth in cash.
Brian Dennehy, of financial analysts FundExpert, recommended investors move 50% of their portfolio into cash. “It’s a time of red alerts, and not just weather. Red alert for markets, for Ukraine, for energy prices and supplies, for inflation and for supply chains.
But Mr Lowcock said investors should not make hasty decisions. “50pc in cash sounds good in theory,” he said. “But once you get out of the market, you have to make the very difficult decision of when to get back in. Most investors will lose money doing that.”
Many of the UK’s biggest banks are still offering paltry interest rates of 0.01pc on easy-to-access accounts. Some 18 savings providers offer easy-to-access offers of 0.01pc, including Barclays, Halifax, Lloyds, Natwest, RBS and Santander, according to Moneyfacts, an analyst.
Rampant inflation means that any money left in easy-to-access cash accounts or cash Isas could drop quickly in real terms. Anyone planning to cash in as the markets fall should be wary as inflation is expected to hit 7.25% in April.
On the contrary, market turmoil can present a good time to invest more, Mr. Khalaf said: lower if there are dips.”
Where will my investments be safe?
As global equity markets suffer, there remain a few traditional safe havens that could offer investors shelter, such as gold. The price of the precious yellow metal has jumped 6% to $1,932 (£1,442) since early February.
Adrian Lowcock, an independent fund expert, highlighted the BlackRock Gold and General fund, which invests in gold mines around the world and has returned 24% over the past five years. He said: “This is a specialized precious metals fund that will benefit from a higher gold price.”
For investors looking for a more conservative approach, Mr Lowcock recommended the £6bn Trojan fund, which returned 28% over the same period. “This fund holds both silver and gold, and has a more defensive quality,” he said.