Buying shares following a stock market crash is frightening for some. For individuals starting out on their investment journey it may seem barking mad. Fears are running high right now too as concerns of a second market crash later in 2020 gather steam.
It’s always a good idea to take a leaf out of Warren Buffett’s book. It’s a particularly good idea to listen to investment gurus like this when market uncertainty is at its peak like today. And he has a thing or two to say about investing according to how you think stock markets will move in the short term.
Don’t fear stock market crashes
The billionaire stock picker says that investors with wise investment strategies “don’t buy or sell… based on today’s headlines”. It’s an especially dangerous game when investors remain as jittery as they are today. Even the best stocks bought following lots of diligent research can get washed out during a broader stock market crash.
The most successful investors like Buffett buy stocks according to their long-term outlook. They pay little attention to the possibility of them getting hammered during a stock market crash. They’re more interested in whether or not the shares they buy will create big profits over a five, 10, 20-year horizon, possibly longer. Profits growth that will likely lead to big share price gains and abundant dividend income.
That’s not to say that the likes of Buffett aren’t responsive to market crashes. They use temporary share price weakness as an opportunity to buy brilliant companies trading at low prices. It’s an approach that all savvy UK share investors need to consider as, over the long run, this strategy can turbocharge the returns you make on your hard-earned cash.
I’d buy this FTSE 100 powerhouse
There’s still an abundance of brilliant UK shares that can be bought for next to nothing following 2020’s market crash. Companies with bright long-term futures that have been oversold on fears of a temporary economic downturn. Whether you have a high or low tolerance for risk I reckon now provides a stock buying opportunity that’s too good to miss.
I for one would happily buy shares in FTSE 100 power grid operator National Grid, for example. The essential nature of its operations means that it can still expect to grow profits whether or not the UK economy suffers a significant near-term hit from Covid-19. This provides excellent peace of mind for even for the most nervous of investors. I’m expecting the bottom line to swell steadily over the next decade, too, as the blue chip builds its asset base in the UK and the US.
National Grid trades on a forward price-to-earnings ratio of 15 times following the stock market crash. This dividend hero carries a gigantic corresponding 5.8% dividend yield, too. And this makes it one of the best-value FTSE 100 income shares out there, in my opinion. But don’t worry if you don’t fancy a slice of this utilities giant. There are plenty of other terrific (and cheap!) Footsie dividend shares to make a fortune with today.
The post Stock market crash: I’d follow Warren Buffett and buy FTSE 100 dividend stocks to get rich appeared first on The Motley Fool UK.
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Royston Wild 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.
Motley Fool UK 2020