IS THE STOCK MARKET A GOOD INVESTMENT?

TOCKS AND SHARES ISA investors have enjoyed handsome returns thanks to stocks rallying on the stock market after the financial crisis, but many will be feeling somewhat nervous after a volatile start to 2018. They fear the nine-year bull market run may finally be drawing to a close after February’s snap sell-off, and are wondering whether they can still afford to take a chance on stock markets now.

You are free to invest your full £20,000 in a Stocks and Shares Isa, if you wish, either in individual company stocks or through an investment fund spreads your money across dozens of companies to reduce risk.

Alternatively, you can divide your allowance between a Cash Isa and Innovative Finance Isa as well.

Ben Kumar, investment manager at Seven Investment Management, says this year’s stock market volatility may have panicked some but is actually quite a normal state of affairs.

“We have simply been lulled into a false sense of security by recent steady market growth and completely forgotten that this is how markets usually behave.” choose to remain tied to underperforming Cash Isas when they could get more from their investments.”

Michelle Pearce, co-founder and chief investment officer of online investment service Wealthify, said long-term investors cannot afford to shun stock markets altogether.

“Even if the bull market ends tomorrow, investors are far better off in the stock market rather than out, especially with cash savers are getting negative real returns after inflation.”

You should never invest money in the stock market you are likely to need in the next five years, which gives you time time for markets to recover from any short-term correction.

Pearce said that although the stock bull market run may be drawing to a close, share prices remain resilient, recovering in recent weeks.

“Global economic growth is still trending in the right direction and companies are broadly in good shape.” Pearce also thinks that the recent dip could even be a buying opportunity. “If you have the courage to invest your money when others are feeling fearful you can pick up stocks and funds at a reduced price, then wait for them to recover in the longer term.”

Pearce says that nobody has a crystal ball, or can say with any certainty where stock markets will go next.

Ultimately, the decision is down to you. It depends on variables such as your attitude to risk, how much exposure you already have to stock markets, and crucially, how long you are investing for.

Younger people have time on their side and should therefore have more of their savings in stocks and shares, older people nearing retirement and beyond need to be more cautious.