The 2020 stock market crash sent share prices plunging across the board. Investor confidence evaporated and many fled traditional equities in search of alternative assets such as gold. As a result, in the depths of the sell-off, the FTSE 100 index shed 32% of its value. Since then though, global stocks have risen sharply, prompting fears of a second stock market crash. However, regardless of whether another major sell-off is around the corner, I’d still buy the best UK shares today in order to build serious wealth.
Second stock market crash?
But just how likely is a second stock market crash? Well, nobody can know for sure. That said, there are a few factors at play that could prove to be a catalyst for another major sell-off. For example, a second wave of coronavirus infections remains an ever-present threat. Rising tensions between the US and China could also soon take their toll on financial markets.
That said, here at The Motley Fool, we’re firm believers in investing for the long term. That means holding your investments for at least five years, but ideally, for much longer. That way, the impact caused by a major sell-off is vastly reduced as your holdings have a longer time period to recover and reach new highs.
Moreover, I’d view a second stock market crash as another opportunity to buy the best UK shares at hugely discounted prices. After all, being greedy when others are fearful is a tried and tested method for building capital.
I’d stick to buying the best UK shares
Nevertheless, I wouldn’t bank on a second sell-off. First and foremost, the stock market is not the economy and financial markets are notoriously forward-looking. Therefore, the much anticipated second market crash might never even happen. With that in mind, I’d press on with buying good-quality shares today, provided you’re in it for the long term.
When it comes to finding the best UK shares to invest in right now, I’m looking out for companies displaying an element of resilience despite unfavourable trading conditions. For example, businesses that have continued to thrive throughout the period of the pandemic may be wise investments moving forward, especially as the economy continues to get back on its feet.
Similarly, investing in defensive stocks could be a solid move for those concerned about long-lasting market volatility. The reason being, companies with defensive characteristics can often prove to be a safety net to investors during turbulent times.
Finally, I think those feeling more adventurous would do well to focus on companies situated within industries possessing the most growth potential. In my view, this means targeting stocks in the technology, e-commerce, and healthcare sectors.
Building a six-figure portfolio
Once you’ve invested in a basket of diversified UK shares, it’s time to sit back and let the wonders of compounding take over. To illustrate, let’s say you invested £500 monthly and managed to achieve an annual return of 8% (the average return of the FTSE 250 is substantially higher at around 12%). After 35 years, your investment pot would be worth £1,078,202.
As such, regardless of a second market crash, I’d stick to investing in some of the best UK shares today in order to build wealth over time.
The post Stock market crash: Here’s why I’d still buy the best UK shares today to make a million appeared first on The Motley Fool UK.
- Stock market crash: Shares of TUI, IAG, easyJet, and Carnival are falling fast. Here’s how I’m investing £1,000 now
- The Aston Martin share price is dirt-cheap. I think you’d have to be tough as James Bond to buy it
- Best UK shares to buy now? Why I’d go for these
- Are we seeing a slow-motion second stock market crash right now?
- The Lloyds share price is dirt-cheap but I'd only buy it on one condition
- Top shares for 2020
Matthew Dumigan 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