The 2020 stock market crash has thrown up some cracking bargains among FTSE 100 and FTSE 250 shares. Those who follow Warren Buffett’s advice will surely have tucked away some nice long-term investments for their retirements.
Remember when he said: “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price“? If you have a list of companies you think are wonderful, then surely you’ll have found them at very fair prices this year.
But a lot of people just aren’t brave enough to put their money into shares when the markets are falling. That’s understandable, as you really don’t want to punt your hard-earned cash on falling shares and watch them fall further.
That’s why gold has soared to record prices in 2020, as investors switch into the metal as protection against the stock market crash. They’ll then face the agonising decision of when to get back into stocks. And those who are simply looking to pick up some cheap shares might be worried about where the market will go next.
FTSE 100 faltering
The FTSE 100, for example, has come back up since its lowest point in March. But for the past couple of months, it’s been drifting back down again. There are plenty of reasons to think it could carry on down, or that we might even face a second stock market crash.
One is the extent of the UK’s recession, which is worse than many feared. GDP dropped 20% between April and June, the deepest fall of any the world’s major economies. There are signs that it could be a sharp V-shaped dip and a GDP recovery could pull us out of the worst of it relatively soon. But there’s deeper structural damage that will surely take a longer time to work its way out.
US stock market crash coming?
Then there’s the US stock market. The S&P 500 and the NASDAQ have both hit record highs in August. That’s during America’s out-of-control Covid-19 crisis, and the resulting deep economic damage. If there’s a correction there, stock markets around the world are likely to follow.
But here’s the thing. Investors always know that there will be a stock market crash some time in the future. We just don’t know when. But we don’t hold off investing for ever. We buy anyway, knowing that buying into wonderful companies at fair prices is likely to generate top returns over the course of our investing lives, regardless of the ups and downs along the way.
Sure, it would be nicer to buy shares even cheaper after a second crash. But if we wait for it, we’ll miss the chance to buy them a bit less cheaply now.
So I say just keep investing regularly. Drip-feed your money into your Stocks and Shares ISA, or whatever you use. And keep making purchases every time you have enough. If the stock market does dip again in the near future, you’ll simply get more for your money when it happens.
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Motley Fool UK 2020