The Cineworld (LSE: CINE) share price took a beating after the world was forced into lockdown by the Covid-19 pandemic. However, cinemas everywhere already faced a challenging future and the pandemic has accelerated trends that were already taking root.

Business challenges

Many of us are familiar with the cinema experience. We turn up, pay a bit too much for our tickets and consider buying some overpriced popcorn, then decide to sneak in some sweets from Tesco instead. Next we find our seats in the dark, sometimes overcrowded, auditorium, then somehow strain to see the picture on the enormous screen before us. I usually forget about these minor inconveniences and enjoy being sucked into an incredible story. But everything I have mentioned above represents a significant challenge to the profitability of cinemas around the world.

Popcorn prices are so high because cinemas have to share a third of ticket sales with the studios. This cut can be higher if the studio is large and the film is a highly anticipated ‘tentpole film’.

Big studios usually have contracts with cinema chains regarding how long a particular film is to be shown on large screens. This restricts a cinema’s ability to diversify its income with films from less demanding distributors. Not that it matters. Those smaller films usually go directly to streaming services, cutting out cinemas entirely.

Cineworld is the second largest cinema chain in the world, but that doesn’t mean it’s immune to these challenges.

The share price crashed after the company was only able to bring in $1.1bn in revenue in 2017. Then, despite bringing in $4.1bn in 2018 and $4.4bn in 2019, the stock traded sideways until crashing again at the start of the pandemic. Even when it was doing its best in late 2019, Cineworld was operating with only a 4% profit margin.

The company has more bargaining power than independent cinemas. But it’s still being squeezed between large American studios and the changing habits of filmgoers.

Pandemic changes

Customers were already more likely to stay at home than go to the cinema before the pandemic. This is in part due to the aforementioned high ticket prices, but streaming services are cutting deep into cinema sales. Streaming allows us to watch some amazing films without leaving our sofas and many television dramas are of equal or better quality than what is usually available at the cineplex.

One of the most significant decisions of the pandemic was Warner Bros choosing to release its large slate of tentpole films both in cinemas and on its streaming service (HBO Max) at the same time.

Releasing on an in-house streaming service makes a lot of sense for a studio. It cuts out ticket sharing with cinemas entirely and forms a new captive customer base that pays for a subscription every month.

Cineworld may be able to benefit from pent-up demand in the coming months. And we’ve already seen with the latest James Bond how keen consumers are to watch some movies in cinemas. But as we saw in 2018, even increasing revenues by nearly four times had a negligible effect on the share price.

Conclusion

Cineworld faces some serious challenges in the future. I don’t think this means cinemas will vanish. But I do think that adding Cineworld shares to my portfolio would be a very bad idea.

The post The Cineworld share price has more than Covid to contend with appeared first on The Twelfth Magpie.

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• Up 446% in 12 months! What’s next for the Ceres Power share price?
• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

James Reynolds does not have a position in any of the shares mentioned.  The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Taiwan Semiconductors

TSMC was founded in Taiwan in 1984 and has been one of the leading suppliers of semiconductors ever since.

What are semiconductors? Well, they’re the main pieces of hardware that make computing possible. I won’t get into the details as they are far too complex for me to even understand, let alone write about. Suffice it to say that without semiconductors, you can’t make computers.

Given the ubiquity of computing devices, the TSMC share price has been on a steady rise since it first went public in 2006. It currently trades at ten times its initial cost.

Semiconductor shortage

The pandemic has caused a lot of problems for the world, but one which you may not have noticed was a worldwide shortage in semiconductors.

Semiconductors are difficult to manufacture and must be made under the strictest lab conditions. Even a single unwanted molecule can render a batch unfit for use. The entire process is incredibly expensive, sometimes taking years and requiring millions, even billions of dollars’ worth of specialized equipment and labour. 

Any disruption in the supply chain can set the whole process back by months and with economies on lockdown, it was nearly impossible to find the workforce needed to mine and extract the key minerals used in production. 

But demand for semiconductors has remained high throughout the pandemic and TSMC actually increased its revenue in 2020 by 50%. You can see this in the TSMC share price history. The company took a small hit at the start of the pandemic, but its share price then went on to almost double.

Even with reduced capacity, TSMC told investors that it expected to make $15.7bn in revenue in Q4 of this year. Production still remains stretched but the company is taking steps to meet demand, namely opening a new factory in Japan.

Japan factory and share price

While I was initially surprised by the decision to open a new factory in Japan, I have come to see the sense of it, and the subsequent jump in the TSMC share price.

This could be seen as a hedge against a more aggressive China. President Xi has recently talked openly about ‘reunifying’ Taiwan with the mainland. That could be behind TSMC’s decision to establish a base in another country.

However, I think the share price action has more to do with the choice by TSMC to reinvest its profits. Many companies, such as Shell or Apple, choose to use profits in expensive stock buybacks. Buybacks benefit shareholders in the short term, but prevent the company from expanding and adapting.

Reinvesting is the kind of action that benefits a company long term and opening a new factory shows TSMC’s commitment to the future.

Conclusion

Will I add TSMC shares to my portfolio? Yes, I think so.

I’ll be watching its price over the next few weeks in case there is a large sell-off, but I feel confident that TSMC is making the kind of decisions I want from a company I invest in.

The post What is happening with the TSMC share price? appeared first on The Twelfth Magpie.

More reading

• The £15bn defence splurge that could send UK shares soaring in July
• Up 446% in 12 months! What’s next for the Ceres Power share price?
• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

James Reynolds does not have a position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Taiwan Semiconductor Manufacturing. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

In my view, it’s a good time to be putting a little bit of money into shares. That’s assuming you’re willing to invest for the long term. Having said that, I expect stock market volatility to remain high in the near term. So a cautious approach that focuses on both risk and reward is sensible.

Is now a good time to invest in shares?

One reason I believe it’s a good time to buy shares is that economic uncertainty is elevated right now. If you’re a long-term investor, that’s a good thing. Uncertainty translates to lower stock prices which, in turn, translates to more potential for profit.

As the world’s greatest investor Warren Buffett says: “You pay a very high price in the stock market for a cheery consensus. Uncertainty actually is the friend of the buyer of long-term values.”

Secondly, fear levels have been very high recently. Last month, the CBOE Volatility (VIX) index, which is often called the ‘fear index’, spiked up to a level not seen since the Global Financial Crisis. For long-term investors, high levels of fear within the market’s investment community can create amazing buying opportunities. To quote Warren Buffett again: “Widespread fear is your friend as an investor because it serves up bargain purchases.”

A third reason I believe it’s a good time to buy shares is that many professional money managers have been buying recently. For example, Terry Smith, who’s sometimes referred to as ‘Britain’s Warren Buffett’ due to his incredible performance track record, has said he’s been adding new stocks to his fund during the recent sell-off. Similarly, Nick Train, who’s regarded as one of the UK’s top stock pickers, has said he’s also been buying stocks in the sell-off. If the pros are buying shares now, it’s a good sign, in my opinion.

Focus on risk as well as reward

Of course, the coronavirus crisis could potentially get worse before it gets better. This means stocks could fall further from here. In the past, bear markets have taken a while to play out, with stocks briefly rallying at times before falling again.

So, my advice, if you believe it’s a good time to buy shares, is to:

• Invest in high-quality companies with strong financials that are likely to be resilient in an economic downturn.

• Diversify your money over many different companies to lower your stock-specific risk.

• Drip-feed money into shares over time. That way, if the stock market does continue to fall, you’ll be able to snap up some shares at lower prices.

By focusing on risk, as well as reward, you’ll give yourself the best chance of profiting when uncertainty dissipates and the stock market rallies.

The post Is now a good time to buy shares? appeared first on The Twelfth Magpie.

More reading

• The £15bn defence splurge that could send UK shares soaring in July
• Up 446% in 12 months! What’s next for the Ceres Power share price?
• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

Views expressed in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The uncertainty over Britain’s economic relationship with Europe looks set to continue for a while but, eventually, we’ll all know the rules of the new game and will be able to concentrate on playing well again. Indeed, normal service will return to the UK’s businesses, to the stock market, and to politics. And we’ll all probably end up wondering what all the fuss was about.

The economy is holding up well

The UK economy has been holding up well since the vote to leave the European Union, as several ongoing economic indicators reveal. I remember around the time of the vote, well-known fund manager Neil Woodford commissioned an in-depth research report where several economic experts examined the likely economic effects of the UK leaving or remaining in the EU. Their conclusion was that whether the UK left or remained, the effects on the economy would be broadly neutral. In other words, the environment for businesses and shares would be stable whatever happened. As we march on through the Brexit process, the predictions in the report seem to be playing out.

So, if you accept that economically Brexit will be something of a non-event, it makes sense to look at shares right now while they languish at low levels. Indeed, research website Stockopedia.com has it that the median forecast price-to-earnings ratio of all shares on the London stock market with estimates is as low as just over 11. The median forecast dividend yield of all dividend payers is more than 4%, and the medium forecast earnings growth of all shares with estimates is as high as 10.4%.

Businesses are trading well

Those indicators suggest to me that, in aggregate, the businesses behind the listed shares are trading well. Yet the stock market is letting us buy shares at prices that assign attractive valuations to the underlying enterprises. Shares are on sale, and I say let’s load up while we can and make our investment money go further than it does in the enthusiasm of a raging bull market. Indeed, when the bull is in full gallop, valuations typically elevate and we end up with a smaller stake in the underlying companies behind the shares.

To get involved, you could go for individual share picking. Or, if you are short of time to research and manage your portfolio, you could effectively outsource the process by going for a directed share-picking service such as those offered by The Motley Fool. Another way is to invest in a managed fund, such as those offered by well-known managers such as Neil Woodford, Mark Slater, and many others. Or, you could go down the route of investing in passive, low-cost index tracker funds such as one that follows the FTSE 100 or the FTSE 250 here in the UK, which I believe to be an attractive option for many. We could be seeing a golden opportunity to invest in the stock market, and I plan to take advantage of it.

The post Forget Brexit! How I’m taking advantage of this golden investment opportunity appeared first on The Twelfth Magpie.

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• The £15bn defence splurge that could send UK shares soaring in July
• Up 446% in 12 months! What’s next for the Ceres Power share price?
• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

Kevin Godbold has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

It was an “early Christmas gift for buyers as sellers lower their price expectations,” Rightmove said in the report. The company, which runs the UK’s largest property portal, reckons the national average asking price for houses stands at £302,023, down £5,222 during the month.

More realistic pricing

It’s all down to new sellers “pricing more realistically,” according to Rightmove, and the trend has been fuelled by stretched affordability and Brexit uncertainty, it said. The largest falls were in the south and the “upper price sector.” Should you be worried if you are a buy-to-let landlord? Maybe.

The kicker for me is the ‘affordability’ part of the equation. Rightmove said sales agreed nationally rose 1% compared to a year ago, but I think sales will only flow if the price is right. The backdrop for owning property looks uncertain to me. Prices have been rising for years and I think they look toppy. Meanwhile, interest rates have been stirring and could start to creep up soon, which could work to keep a cap on house prices going forward – perhaps until affordability catches up.

If you are thinking of going into buy-to-let for the first time, maybe now is not a good time. The start-up costs are large when you consider the deposit you’ll need to invest in a property and the tax regime has rendered the ownership of tenanted property far less attractive than it once was.

Passive investing saves time

On top of that, getting your hands dirty by physically owning and operating property in a buy-to-let scenario is seriously time-consuming and hassle-filled, which may not be ideal if you are already busy working in another career. Instead, I reckon passive investing in shares is a far more attractive option.

I’d go for opening a stocks and shares ISA and investing in a low-cost index tracker fund within it so you gain all the tax advantages that an ISA offers. You could pick a tracker fund that follows the FTSE 100 index or the FTSE All Share index, or maybe you would prefer to pick a managed fund where a fund manager makes all the investment decisions.

Compared to investing in buy-to-let, investing in shares is far less bothersome and requires a lot less time to maintain. Here are three reasons to do it now.

Pipes don’t burst

You won’t get any calls to say your pipes have burst with shares. The heating won’t break down either, and the door won’t fall off its hinges. Passive share investing doesn’t take time and money to maintain like buy-to-let can.

Directors don’t build up dividend arrears

Unlike tenants, who sometimes won’t, or can’t, pay their rent, the directors of the underlying companies you’ve invested in don’t build up dividend arrears. The dividend payments will keep coming from your index tracker or managed fund and if you choose a fund that automatically reinvests them, you’ll be on the road to compounding your money.

You don’t have to leave your home to invest

Best of all, with shares you can invest from the comfort of your own home, so you can say goodbye to all the hassle that comes with buy-to-let.

The post 3 reasons to like shares more than buy-to-let property appeared first on The Twelfth Magpie.

More reading

• The £15bn defence splurge that could send UK shares soaring in July
• Up 446% in 12 months! What’s next for the Ceres Power share price?
• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

Kevin Godbold has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Plenty of investing pundits hold up such people as shining examples of financial prudence, and of how to save and invest over a lifetime. But in my view they’re missing the most important part of the word ‘lifetime’ — life.

I don’t know about you, but I’m not aiming to be the richest one in the cemetery, and I’m certainly not living my life like Scrooge, pinching every penny and leading as cheap and miserable an existence as I can just to accumulate cash.

Balance

No, the key to investing, as with most things, is moderation and balance — and you can accumulate a tidy sum and achieve financial independence while still actually spending enough to enjoy life. It all comes down to sensible financial planning.

The best thing you can do is start as early as you can. If you’ve just finished school, college, university, or whatever and you’re starting your first job, you’re suddenly going to have some worthwhile amounts of cash coming your way.

It’s tempting to just spend it all on enjoying yourself, thinking that you still have most of your life ahead of you and that it will be decades before you need to start worrying about your retirement. But no, that time in your life provides you with the best opportunity you have for achieving longer-term financial comfort.

Invest for the long term

If you put, say, 10%-20% of your salary aside each month (into a stock broker account, and buy shares when you’ve accumulated enough for a cost-effective purchase), you’ll never really miss it as it’s money you never had before. And of course, over the course of your career you should hopefully be able to increase your monthly investment instalments at regular intervals.

But how much will you be able to accumulate? Assuming you manage an average investing return of 6% per year (which is modest — you can probably get close to that from dividends alone), and supposing you can put away £500 per month… after 41 years you’ll have a cool million stashed away. If you start work at 21, that’s a pretty comfy retirement you’ll be lined up for aged just 62.

Now, £500 might be too much to manage when you first start working, but you can hopefully work up to it and beyond — and a relatively modest £280 per month would still get you a million in 50 years, or more than half a million after 40 years.

Why shares?

Isn’t investing in shares a risky business? In the short term, yes it can be — but the longer you have, the safer it is.

Barclays, in its annual equity-gilt study, has discovered that shares have been the best performing investment from 1899 to 2016, beating cash in a savings account in 91% of all rolling 10-year periods. Extended to 18-year periods, shares have won 99% of the time. And over 23-year periods, cash has never beaten shares.

The conclusion is easy — with decades at your disposal, investing in shares is easily your best chance of achieving financial independence. But live your life too.

The post How to achieve financial independence without being a Scrooge appeared first on The Twelfth Magpie.

More reading

• The £15bn defence splurge that could send UK shares soaring in July
• Up 446% in 12 months! What’s next for the Ceres Power share price?
• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has recommended Barclays. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

In terms of the long-term outlook for property, it offers significant capital growth potential. Over the next decade, the UK population is forecast to rise at a rate of around three times the number of houses currently being built each year. This means that the demand and supply imbalance that has been a key reason for house price growth in recent years could continue over the long run.

However, in the short run house prices could fall. The effects of Brexit are yet to be fully felt by the UK housing market, since the negotiation period with the EU is likely to cause a much higher level of uncertainty than that experienced since the EU referendum. This could damage confidence in the UK property sector and lead to first-time buyers and investors putting off purchases until a more certain outlook is present. However, greater certainty may not appear in the current decade, since fear towards the property sector may be at its highest when the UK goes it alone in 2019.

Price growth under pressure

Furthermore, higher stamp duty and changes to taxation mean that property isn’t as appealing as an investment as it was just a few years ago. And with the pound having weakened in recent months, the necessity of low interest rates may be fading somewhat. A weaker currency could provide a boost to the UK economy as well as higher inflation. In such a situation, interest rates may rise and this could dampen demand for mortgages and cause house price growth to come under pressure.

Of course, shares face risks, too. The election of President Trump could lead to increased uncertainty among investors, since changing policies may impact negatively on the US economy. Furthermore, Brexit could cause the UK economy to experience a difficult period, which could cause share prices to fall. And with a US interest rate rise likely before the end of the year, it would be unsurprising for the UK stock market to experience falls in the short run.

As such, the short-to-medium term could prove to be a good time to buy both property and shares and plan to hold them some time. However, since shares offer greater liquidity, higher diversification and are easily accessible for investors both large and small, they provide the most practical and logical means of generating a high return in the coming years. And with no mortgage required, no tenants to deal with, a lack of void periods, as well as no maintenance charges, it’s a wonder why anyone favours property over shares in the first place.

The post Should you dump your shares and pile into property? appeared first on The Twelfth Magpie.

More reading

• The £15bn defence splurge that could send UK shares soaring in July
• Up 446% in 12 months! What’s next for the Ceres Power share price?
• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

For most, I think the answer to that question is “no”.  I’d go as far as to say that a mere £500,000 would be sufficient to generate an income capable of providing a happy retirement.

Consider this

By the time most people think about taking retirement they’ve paid off their mortgage, so a big expense from earlier years is absent from the monthly budget. Mortgage-free home ownership gives you the financial freedom to live a rewarding life with a lower income and around £500,000 may be enough capital to generate such an income.

This is what £500,000 can yield at different annual rates of return:

I admit that things could still be a little tight if you don’t own your own home by the time you retire and perhaps have to keep paying rent. However, if you are in a relationship both you and your partner have the opportunity to build retirement pots, so potentially the above returns could be doubled.

A return of 5% yields an income close to Britain’s national average salary, which stands around £28,000. My guess is that, for most people, an income like that in retirement would be enough enjoy life to the fullest. On top of that, you’d still have the original £500,000 capital in the pot plus the value of the property you own. I think many people could feel secure on that.

How it can be done

You have a decent shot at achieving a return of 5% every year if you invest your money in shares paying a reliable and growing dividend. If you invest in firms with a strong record of growing their incoming cash flow and paying dividends that rise a bit every year the dividend yield of your overall portfolio should grow towards 5% and beyond.

By selecting firms with defensive, growing, cash-generating operations your dividend income is likely to grow a little each year, which should help your personal finances to keep up with inflation through your retirement. In addition, as firms raise their dividends to keep pace with the underlying growth of their businesses their share prices tend to rise too, which should help your invested capital keep up with inflation.  

How to accumulate the £500,000 you need

The key to this retirement funding strategy is to ensure that you invest in good quality firms with stable cash-generating qualities. You don’t need to take great risks on the stock market to succeed, just invest and hold on to decent, reliable dividend paying firms.

You can build your retirement pot in the same manner. Invest in great dividend-paying firms, but instead of drawing the dividend income to live on, reinvest the dividends back into the firms you are holding so that your returns compound.

Do that and £500, 000 — and a happy retirement — could be closer than you imagine.

The post Half a million could be all you need to retire happy appeared first on The Twelfth Magpie.

More reading

• The £15bn defence splurge that could send UK shares soaring in July
• Up 446% in 12 months! What’s next for the Ceres Power share price?
• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

Kevin Godbold has no position in any shares mentioned. The Motley Fool UK has no position in any of shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

This seems like an example of one of the negative effects for British consumers of the pound’s plunge against other currencies since the Brexit vote, and there could be much more of this kind of thing to come.

Higher inflation is on the way

The Bank of England (BoE) thinks higher inflation is on the way. An increase to 2% by the end of 2017 and 2.4% in late 2018 and 2019 is the central bank’s best guess — a big leap from today’s 0.6% or so and a forecast that represents the BoE’s highest ever medium-term inflation forecast.

How fast will other retailers be to follow Apple’s lead and raise prices for imported goods? Not all firms are rushing to raise prices. Primark owner Associated British Foods reckons it will take the hit from the higher costs of imports in order to preserve its position as a bargain retailer. Next, on the other hand, wants to pass higher prices on to its customers, but not until 2017 when its currency-weakness hedges run out.

Two ways to survive an inflation shock

Whether inflation takes hold as an ongoing problem like it did in the 70s or 80s is another question. Perhaps sterling’s recent devaluation and the inflation it’s likely to cause will end up being a one-off event. However, the Brexit process presents us with many uncertainties going forward, so I reckon it’s a good idea to position our finances so that they can withstand ongoing inflation now that this warning shot has been fired.

One method to help preserve personal buying power is to earn regular income. Salaries tend to rise over time to compensate for the effects of inflation. A second method is to invest in shares. Companies can adjust prices for inflation and their share prices tend to rise to compensate for the higher revenues and profits they then generate. The rising share price will help guard your capital against value erosion from inflation.

Compounding can beat inflation

The London stock exchange is home for many great companies with sound businesses, strong balance sheets, consistent cash flows and established trading niches. One method of keeping ahead of inflation might be to reinvest dividends back into your investments so that both income and capital returns combine to produce compounding returns. 

If you choose shares carefully, underlying business growth can work with compounding returns to propel your invested funds ahead of inflation. Investing in shares is a well-trodden route to preserving and growing wealth, most institutional pension funds do it for example. If you don’t want to invest in individual firms, picking index tracking funds or other collective investments such as exchange traded funds (ETF) can be effective too. Getting involved in the stock market today may help you survive an inflation shock and any unwanted effects of inflation for years to come.

The post How to survive an inflation shock appeared first on The Twelfth Magpie.

More reading

• The £15bn defence splurge that could send UK shares soaring in July
• Up 446% in 12 months! What’s next for the Ceres Power share price?
• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

Kevin Godbold has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended Apple. The Motley Fool has the following options: long January 2018 $90 calls on Apple and short January 2018 $95 calls on Apple. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

In the organisation’s first calculations since the Brexit referendum, the BCC reduced its forecasts for the current year and for the following two years arguing that uncertainty around the UK’s long-term political arrangements with the EU and the timescale of the Brexit process will “dampen growth prospects towards the end of 2016 and over 2017.”

No recession

On a brighter note, the BCC reckons the UK will avoid a recession even though the economy will flirt with decline. GDP growth forecasts are down from 2.2% to 1.8% for 2016, from 2.3% to 1% in 2017, and from 2.4% to 1.8% in 2018. However, ongoing weakness in sterling against other currencies should help bolster Britain’s net trade position.

The downgrades to the BCC’s forecast suggest the UK economy will fall short of the organisation’s previous forecasts by £43.8bn by the end of the forecast period. Adam Marshall, acting director general of the BCC said: “Although individual businesses continue to report strong trading conditions, the overall picture suggests a sharp slowdown in UK growth lies ahead.”

Should I worry?

Considering the magnitude of the political and economic tremors rippling over Britain’s economy as it begins the process of disentangling itself from the European Union, the BCC’s forecasts don’t look too bad to me. GDP growth of just 1% in 2017 is still growth, which suggests a benign economic environment for firms to operate in.

However, macroeconomic forecasting isn’t a source of too much worry and concern for me in any case. The important news I’m following is that coming from the firms I hold or want to buy as investments. As long as the business economics behind firms I’m watching don’t deteriorate and their finances remain strong, there’s every reason to hold on tight to shares as the underlying businesses trade their way through any forthcoming economic soft patch. 

An opportunity to buy?

It’s possible that sentiment could work to put pressure on share prices, but any setback could throw up opportunities to buy more shares of great companies at better prices rather than selling in a panic. That’s what the great and famous investors such as Warren Buffett have always done, of course. A little bit of economic doom and gloom in the headlines sparking off volatile share prices is just what the long-term business-minded investor needs. Such conditions make it possible to build a portfolio of shares of great businesses with compelling economics bought at attractive prices.

I’m not going to sell my shares because of the BCC’s revised forecasts but I am switching to red alert in the hope of picking up some investment bargains over the next couple of years. 

The post Should I sell everything? appeared first on The Twelfth Magpie.

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