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Yesterday, the FTSE 100 fell 3.5% capping off the worst week for the blue-chip index since March 2020. As the sell-off accelerated, the clear temptation to sell out and run for the hills can be overwhelming. I can tell you what I did, though. Absolutely nothing. Let me explain why.

What astonishes me so much about investing is the herd mentality. Just as people will rush to buy in to the next new stock craze, so they will sell out just because others are doing so. But all that panic-selling does is crystallise one’s losses.

Until an investor has experienced first-hand a widespread sell-off like we witnessed yesterday, there is really no way of gauging how one might react in advance. If I had hit the sell button and locked in losses, then in the immediate aftermath I would:

• Assess my appetite for risk. Revisit the stocks that remain in my portfolio. Carefully consider whether they fit my long-term investing goals and level of risk
• If I had not done so already, I would consider investing some of my savings in a tracker index to diversify my portfolio

Temperament and conviction

When I tell friends and family that I have bought shares in companies, I am almost always met with a response like: “Do you enjoy losing money?” That is because most people are pre-conditioned to think that investing is a sprint, when in fact it is a marathon. Look at any major stock market index like the S&P500, FTSE100 or Nasdaq. They all have one thing in common: an upward trend line over a long-term timeframe.

For me, the most important factors that determine the level of returns an investor can expect from their investing career, are conviction and temperament. After all, that is the secret sauce that made Warren Buffett the most famous investor in history.

As a relative newbie investor – I bought my first stocks in November 2019 – I have only ever experienced one sustained stock market sell-off. The Covid crash decimated my portfolio. At one point it was down 30%. However, every stock I had invested in was a blue-chip. Each had a decades-long track record of generating substantial returns for investors and a proven business model. And while most were selling, I was doing the exact opposite and buying. It turned out to be the best move I ever made.

So, what gave me the confidence to do that? Simple. I had done my homework. I had researched the companies. I had considered factors such as their value proposition, competitive advantage over rivals and wider market trends. I gleaned most of that information from their free annual reports as well as my own personal sector knowledge.

Never underestimate the power of knowledge. As the maxim goes, knowledge is power. It provided me with confidence in my stock picks. That is why investing is an inherently personal journey. Far too many investors believe that they are in competition with other market participants. But for me, an investor’s greatest enemy is staring at you in the mirror!

So, if the market does continue to fall in the coming weeks, I will not be selling. Instead, I will be buying my favourite stocks on my watchlist.

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.

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Following recent stock market volatility, I have been searching for bargain shares to buy. A couple of companies have attracted my attention for their discount valuations and potential over the next few years. 

As such, here are some of the bargain shares I would buy today for my portfolio. 

Bargain shares 

The first company on my list is the automotive retailer Vertu Motors. Surging used-car prices are set to send this firm’s profits 270% higher this year.

This growth seems unlikely to last, but the organisation is looking to reinvest its windfall profits into additional growth initiatives. These could help underpin the company’s expansion plans for years to come. 

Considering this potential, I think the market is undervaluing the business. It currently trades at a forward price-to-earnings (P/E) multiple of 8.5 for 2023. 

Another corporation seeing surging demand is homebuilder Redrow. The company and its peers just cannot build homes fast enough. Its profits are expected to rise 25% this year as management capitalises on this growth. 

Despite the growth potential, the stock is selling at a forward P/E of just 5.8. The shares also offer a dividend yield of 5.7%, at the time of writing. 

The one main risk both of these companies might have to deal with going forward is that growth grinds to a halt. They are both benefiting from significant tailwinds in their respective markets, but an economic slowdown could slam the breaks on growth. That is something I will be keeping an eye on as we advance. 

Growth champion 

Integrated investment banking company Numis  (LSE: NUM) has taken the City of London by storm over the past couple of years. 

The corporation has cornered the market for helping smaller companies raise finance. Last year, its revenues jumped to £224m and net profit hit £58m, which was more than double the figure reported for 2016. 

The group is investing heavily in its offer, while expanding its footprint in the UK market. Its reputation for helping businesses come to market is also boosting its profile. 

That said, one issue of working in the investment banking business is that it is quite volatile. Last year was a bumper year for raising finance. That may not be the case this year. The company could suffer a slump in revenues as a result. 

Despite these headwinds, I think the stock looks undervalued. At the time of writing, the shares are dealing at a forward P/E of 8.6. They also offer a prospective dividend yield of 5.2%. 

Considering the company’s expanding footprint and brand strength, I think this multiple undervalues the enterprise and its outlook. That is why I believe this is one of the best bargain shares to buy now and would not hesitate to add it to my portfolio. 

Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has recommended Redrow and Vertu Motors. 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.

I’m hunting for FTSE 100 shares to buy. But recent volatility in the lead index could have driven some investors to buy gold. And I can understand the attraction. The price of gold is trading just below its all-time high — it hit $2078.88 an ounce in August 2020 and is close to $1,944, as I write.

The metal has long been considered a safe haven in times of economic uncertainty. And some investors allocate a portion of their portfolios to gold to achieve diversified asset allocation.

The FTSE 100 looks attractive

But I think the FTSE 100 is more attractive than gold for my long-term portfolio. And that’s the case even though many Footsie companies have seen weakness in their share prices recently.

The index has a remarkable track record of bouncing back from its lows. And part of the reason is that fallen stock prices can sometimes lead to lower valuations. So when that happens, it’s natural for investors to buy the stocks — leading to rising valuations again.

And that can be rational because shares often fall in price even when underlying businesses remain little affected by whatever the macroeconomic worry of the day happens to be. So if I buy stocks of sound and growing businesses when they are cheaper, gains in the coming years could help me retire earlier. But that outcome isn’t certain, of course.

The geopolitical crisis in Eastern Europe will end at some point. And when it does, my expectation is for the FTSE 100 to gather steam again. That’s certainly what’s happened after every other crisis in history affecting the markets. Although there’s no guarantee the same pattern will repeat again this time. Indeed, all shares carry risks and the potential for investors to lose money.

Long-term potential

But there’s also potential to make gains as well. And billionaire investor Warren Buffett, for example, made his vast fortune by buying stocks when everyone else is worried about something. The second part of his strategy involves holding onto those positions for years as the share prices recover, along with the underlying business operations.

In the short term, the performance of the FTSE 100 and its constituent stocks may continue to be poor. And the situation appears to be driven mainly by the news flowing from the Ukraine situation.

However, in the long term, the Footsie has delivered some impressive growth. The index started in January 1984 with a base level of 1,000. But it now stands near 7,200, as I write. And it could deliver similar performance over the decades to come.

My strategy is not without risks, but I’m investing now in a FTSE 100 tracker fund and into the shares of selected companies. And although a positive outcome is not certain, I’m hoping that my investments now will grow and allow me to retire earlier than I might otherwise have done.

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.

Key Points

• Dividends from shares are a source of passive income
• Property is considered as a safe long-term asset class
• Potential safety from diversification can help offset a lower yield

One of my favourite strategies for passive income is to buy dividend-paying shares. However, rather than pick and choose individual stocks, I’ve always been a fan of exchange traded funds (ETFs). These allow me to invest in multiple companies by just holding one share and are usually low cost. There are lots of choices of funds available, but here’s one of my ‘must-have’ passive income ETFs for 2022.

A property ETF

Many investors consider property as one of the safest long-term asset classes. Though I might be wrong, in the turbulent times at present, I think property with its stable income streams and potential for capital appreciation is more important than ever. Although there are various ways to get exposure to property, for my own portfolio a real estate ETF is high on the priority list.

The fund I’ve been looking at is iShares UK Property UCITS ETF GBP DIST (LSE: IUKP). This dividend-paying ETF aims to provide diversified exposure to UK real estate by tracking the FTSE EPRA/Nareit UK Index. The index is designed to track the performance of property companies and real estate investment trusts (REITs) listed on the London Stock Exchange.

It’s a decent size, with over £600m in assets, has a relatively low ongoing charge, and has been going since 2007.

The ETF is also well-diversified, holding the 40 firms listed in the index. These operate in a wide variety of sectors including industrial, residential, and healthcare property.

Out of the 40 companies, the largest holding is Segro at just over 20%. This specialises in out-of-town business space and is one of the biggest industrial property companies in Europe. Real estate giants such as Land Securities Group and British Land are also in the fund, as is the largest UK operator of purpose-built student housing, The Unite Group.

A dividend-yield I can work with

One of the main drawbacks to iShares UK Property UCITS ETF GBP DIST is the relatively low dividend of 1.96%. I know that if I carefully pick and choose some companies in the FTSE 100 I might be able to get a better yield, however, for my own portfolio, this passive income is good enough.

This is because the fund is so well diversified. It means that if any individual company or sector has a weak period, it should not mean the game over for the entire ETF. In essence, I’m giving up the chance of a higher return for owning multiple companies through a single share.

In truth, this fund is unlikely to make me rich. However, it promises to give me long-term returns from what I hope is a stable asset class. For that reason, it’s a ‘must-have’ passive income pick for my own portfolio for 2022.

Niki Jerath does not own any of the shares mentioned. The Motley Fool UK has recommended British Land Co and Landsec. 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.

I am always on the lookout for passive income investments. And I believe investment trusts are some of the best ways to invest for income. 

Unlike other investment vehicles, these companies do not have to pay out all of the income they receive from their portfolios each year. They can hold 15% back in reserve.

This means they can hold back some of the income they receive in good years and use it to boost dividends when businesses may be cutting theirs.

This structural advantage gives investment trusts a unique quality. It also means they have been able to pay consistent dividends through both the good and bad times. 

This quality is the main reason why I believe investment trusts deserve a place in my passive income portfolio. With that in mind, here are two trusts I would buy for income right now. 

Investment trusts for income 

The first on my list is the City of London Investment Trust (LSE: CTY). This firm has one of the longest track records of consistent dividend increases in the investment trust space. It has continually increased its payout for 55 years.

The portfolio is concentrated in a diverse basket of London-listed equities. At the time of writing, the stock supports a dividend yield of 4.8%.

A downside of using investment trusts to invest for income is they tend to charge an annual management fee. In this case, it’s nearly 0.4%. This charge could eat into investor returns in the long run.

There will also be a chance the manager could pick the wrong investments, incurring losses for my portfolio. 

Even after taking these factors into account, I would buy the City of London for my portfolio as an income investment today. 

Passive income play 

While City of London has a UK focus, the Bankers Investment Trust  (LSE: BNKR) has a more diverse focus. 

Like City, Bankers has also been paying and increasing its dividend for 55 years. At the time of writing, the stock supports a dividend yield of 2%. It has an annual management charge of 0.5%. 

Some of the most significant holdings in the portfolio are international growth and income giants. The largest is technology group Microsoft. The trust has made a trade-off here. Rather than focusing on income alone, it focuses on income and growth, which has produced better capital returns in the long run. 

Still, Bankers’ focus on growth stocks rather than income plays alone could expose me to more volatility. If these companies do not live up to the market’s lofty growth expectations, they could underperform and hit the trust’s returns.

The focus on growth and the lower yield are the reasons why I would own this company alongside the City of London. I think the two corporations complement each other perfectly. 

Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has recommended Microsoft. 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.

I began my stock market investing journey many years ago. But if I had to start, I think it would be a great time to start investing now. Contrarian as this sounds, I assure you it is not. Consider this. Some of the biggest FTSE 100 companies have been around for what seems like forever. They have survived a century that had two World Wars and a Great Depression. And these are among many other challenges faced in just the 20th century. Even as we are beginning the 21st century, there have been a few already. These companies are soldiering on after a huge blow from the financial crisis in the 2000s. And then they faced the near-shutdown of the global economy caused by the Covid-19 pandemic. 

The big challenges for now

That gives me a lot of confidence in the fact that they might just be very well placed for surviving the latest challenge to the global stock markets, triggered by Russia’s war on Ukraine, that is showing no signs of abating right now. There are many potentially challenging spillovers of this attack, of course. The most obvious one that we are already facing is the rise in oil and gas prices. Inflation was already running up even earlier, and with a rise in fuel prices it could well be on its way to spiralling out of control. And if we have a period of sustained high inflation, an economic slow down is not far behind. There is also the potential for social unrest, as Germany has pointed out. Russia is Europe’s biggest gas supplier and cutting off its supplies in response to the war could create a huge demand-supply mismatch. 

Why I’d start investing now

My point here is that considering the long-term history of FTSE 100 stocks, there is a strong probability that they can survive. And if I were to start buying stocks when they are dipping on account of broad market weakness, I could end up much farther ahead in a much shorter time than otherwise. That said, I would like to make my choices carefully. The last thing I want to do is to get into the stock markets now, get burned, and never pick up the confidence to get back into investing ever again. 

Best stocks to buy

I think some of my best bets right now could be global multinationals. Because they have interests in many parts of the world, and are not just Europe focused, they are less likely to feel the impact even if things get worse in Ukraine. Big oil companies like BP and Royal Dutch Shell are two such I like, though an economic slowdown could impact them down the line. Tobacco biggie Imperial Brands is another one which could also gain from being a defensive stock. 

Manika Premsingh owns BP, Royal Dutch Shell and Imperial Brands. The Motley Fool UK has recommended Imperial Brands. 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.

The increasing demand for green energy could be a boon for companies in that field. But probably there will be winners and losers. Often, as an industry develops, some businesses pull away from the pack while others end up failing. Here are three green energy shares I have been considering for my portfolio.

SSE

The former Scottish and Southern Energy has been in the power generation game for generations. Now known as SSE (LSE: SSE), the company is a FTSE 100 member and has been expanding its renewable energy footprint in recent years.

From an investing perspective, I do not see that shift as wholly positive. The company cut its dividend by 18% in 2020. I took that as recognition that it was moving from areas with proven strong profitability into ones where the economic returns are less compelling, such as windfarms.

There are also extensive capital expenditure costs in setting up energy infrastructure and those can eat into profits. Indeed, at the interim stage, SSE’s investment and capex costs for the current year soared 140% to top £1bn. Still, with an established, profitable business and a 5% yield, I see SSE as a lower risk pick among green energy shares I could hold in my portfolio compared to some newer companies without a proven customer base or profitability model.

Biffa

To many people, the name Biffa (LSE: BIF) may be more associated with the sides of rubbish carts than energy. But in fact, some of the rubbish the waste management company collects is then used to generate gas. This is no small-scale operation: Biffa operates 34 landfill gas locations and generates 530 million kWh of energy per year.

Green energy shares

Can Biffa’s gas operations be considered green energy? After all, many critics do not see landfill waste sites as green. I think that reflects one of the challenges of being an ESG investor. It can often be hard to land on a clear definition and find an investable company that meets that definition in all of its business. For me, Biffa’s recycling and landfill gas generation mean that I would consider it for my portfolio from a green energy and indeed ESG perspective.

Financially, though, I am not compelled. After an 18% share price increase in the past year, the company trades on a price-to-earnings ratio of 42. That looks very costly to me. The net debt pile of £579m – equivalent to 59% of the company’s market capitalisation – also puts me off as servicing that debt could eat into profits. So I will not be adding these green energy shares to my portfolio for now.

ITM Power

A different angle in green energy shares is offered by ITM Power (LSE: ITM). The company is a specialist in hydrogen energy.

ITM has promising technology and has built a large factory in Sheffield, with another factory in the works. That should help increase its ability to generate revenue, which last year grew to £4.3m. But for now, I do not think the company is an attractive fit for my portfolio. Its revenue is small and the company remains heavily loss-making. Post-tax losses last year were £28m. Meanwhile, its market capitalisation of £1.9bn seems very big given the amount of work ITM still has to do to prove the long-term commercial viability and profitability of its operation.

Christopher Ruane 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.