The stock market crash has presented a relatively infrequent opportunity for investors to buy undervalued FTSE 100 and FTSE 250 shares in a Stocks and Shares ISA. Over time, they have the potential to not only recover from the stock market’s recent decline, but to produce high returns that could even lead to a seven-figure portfolio.
As such, now could be the right time to invest £20k, or any other amount, in high-quality businesses that have the potential to produce high returns as the stock market recovers.
Making a million from a stock market crash
The 2020 stock market crash is likely to have left many investors feeling disappointed with the performance of their portfolio. They are likely to be experiencing paper losses in some cases, which may cause them to doubt whether the stock market offers the potential to deliver a portfolio valued at over £1m.
However, the FTSE 100 and FTSE 250 declines of recent months present an opportunity to increase your chances of generating strong returns in the long run. They have caused many shares to trade on low valuations. In some cases, they are warranted due to the ongoing challenges faced by numerous industries that could negatively impact on financial performances for a sustained period of time. But in other cases, there are high-quality businesses currently trading at low prices simply because investor sentiment towards risky assets is weak.
Therefore, investors who can look beyond the recent disappointment of a stock market crash and instead focus on its recovery prospects may be able to generate high returns from buying undervalued shares in the coming years.
Investing in a Stocks and Shares ISA
Opening a Stocks and Shares ISA soon after a market crash may not seem to be a logical approach for many investors. They may instead focus their capital on other assets, such as cash and bonds, that offer lower risks.
However, investing through a Stocks and Shares ISA could improve your chances of making a million. All investments held within it are not subject to tax. For a long-term investor, this could save a significant amount of money in tax payments – especially since tax rises may be on the horizon as the UK’s deficit has increased following coronavirus.
A Stocks and Shares ISA also offers flexibility, in terms of withdrawals being allowed at any time without penalty. This may make budgeting easier for a range of investors in different situations. And, with an annual ISA allowance of £20k, it is likely to be sufficiently large for most investors who are seeking to capitalise on low valuations after the market crash. Doing so could boost your financial outlook, and help to increase your chances of making a million over the coming years.
The post Stock market crash: I’d invest £20,000 in a Stocks and Shares ISA today to make a million appeared first on The Motley Fool UK.
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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.
Motley Fool UK 2020