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2025 has been a nervous time on the stock market – and that may well continue. Over recent weeks, the flagship FTSE 100 index of leading shares entered correction territory, falling 13% in a matter of weeks. It has since regained much of that ground though.
Such choppy markets can be unnerving even for a seasoned investor, let alone a stock market beginner. But they are part and parcel of investing – and can offer some excellent opportunities.
So, as FTSE 100 shares continue to move around a lot, here is what I am doing.
Going back to basics
When markets move wildly it can be tempting to think a new approach is required.
I reckon the opposite is often true. Choppy markets are precisely the right time to focus on one’s long-term strategy rather than letting the noise of news headlines lead you into confused decision-making.
My approach is to buy shares in what I see as excellent companies at attractive prices then hold them over the long run, picking up any dividends along the way.
Responding to stock market turbulence
Bearing that in mind, for some of my holdings, I have been doing nothing. A move down in the share price does not affect my long-term investment thesis.
For some though, I have been nervous about the potential impact of an uncertain global economic outlook. Many FTSE 100 firms have decent liquidity, but smaller companies can have weaker balance sheets and worse access to additional capital when markets get rough.
That can be a real problem, as medium-term cash flow problems can sink even a strong business. I have been looking at my whole portfolio and deciding whether the current economic uncertainty has changed the investment case of a share to the point that I should sell.
Aside from the balance sheet, the risk the uncertainty poses to a business’s normal operations is also on my mind. For example, FTSE 100 financial services company M&G has been on my watchlist. A recent price fall means it now yields over 10%.
But I have not yet felt ready to buy. I see a risk that choppy markets could hurt demand for M&G’s asset management services, potentially eating into revenues and profits.
Hunting for bargains
Still, I do see the turbulence as an opportunity to pick up some bargains.
For example, Scottish Mortgage (LSE: SMT) has fallen by 14% over the past month, although on a five-year timeframe it is still up by 35%.
On one hand, the investment trust has a tech-heavy portfolio that means it could see further price falls if key holdings like Nvidia continue to lose value.
On the other hand, Scottish Mortgage has an excellent track record of picking strong long-term performers. While past performance is not necessarily indicative of what will happen in future, Scottish Mortgage has not only seen its share price tumble, but it now trades at a discount of 9% to its net asset value.
Over the long term I remain bullish about its holdings like Nvidia and SpaceX. For now, the risks continue to put me off. But, if the FTSE 100 investment trust keeps falling in price, I will consider whether it is priced at a level that I would be happy to pay.
