It wouldn’t take much to trigger a second stock market crash. But investors should view this possibility as a chance to buy cheap UK shares, rather than a threat to one’s wealth.
Those not taking advantage of the crash in March will have been kicking themselves as the FTSE 100 and FTSE 250 recovered rapidly. However, that recovery is now under threat, due to lockdown 2.0 and US political uncertainty. If markets crash again, investors could be handed a second chance to buy cheap UK shares. Don’t miss it this time.
History shows that those who buy UK shares when markets are down reap the rewards in the longer run. Share prices rarely stay cheap forever. Investors go hunting for bargains in the wreckage, and that drives the recovery.
I’d buy cheap UK shares today
Once people suspect the worst is over, markets can rapidly rebound. Some of the biggest returns ever witnessed may come in the months after a stock market crash. That’s when UK shares are at their cheapest and have greatest recovery potential.
By taking advantage of buying opportunities in the troubled months ahead I’d power up my plans to make a million to fund an early retirement.
But too many investors prefer to sit on the sidelines when the outlook’s uncertain. That’s understandable, but costly. Only buying when investors are happy and stock markets are rising means blowing a big opportunity to buy cheap UK shares. Buying shares when they’re expensive is no way to make a million for your retirement.
A little risk also has to be factored in. As famed investor Peter Lynch said: “You need to know the market’s going to go down sometimes. If you’re not ready for that, you shouldn’t own stocks. And it’s good when it happens.”
While it may hurt at the time, a stock market crash is a good thing. Shares cannot be expected to power upwards forever in a straight line. A crash is good because it offers up a great opportunity to buy UK shares when they’re cheap, so don’t waste it.
I’d pick up more bargain stocks tomorrow
Lynch also said: “What you learn from history is the market goes down. It goes down a lot.” That’s certainly the case this year. The FTSE 100 is down almost a quarter. Even if equities don’t crash further, there’s still plenty of cheap UK shares on offer wherever you look.
So loading up on stocks and the market drops isn’t a time panic. Stay invested and coolly wait for the recovery, while taking advantage of this fresh opportunity to load up on cheap UK shares.
Here’s one more quote from Lynch: “I’ve found that when the market’s going down and you buy funds wisely, at some point in the future you will be happy. The same applies to shares.”
Deep down, I’m almost hoping we’ll see another stock market crash, because I’m all geared up to buy more cheap UK shares.
The post Stock market crash! I’m buying cheap UK shares to make a million for retirement appeared first on The Motley Fool UK.
Harvey Jones 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