We all dream of becoming a millionaire, but very few of us make it over the finish line. It doesn’t have to be that way though. Investing in UK shares is a tried-and-tested way of getting rich and retiring early. The rocketing number of Stocks and Shares ISA millionaires over the past decade is perfect evidence of this.
You don’t have to spend a fortune to try and reach this goal either. But you do need take the bull by the horns when rare investment opportunities arise. That means diving in and buying UK shares after stock market crashes. It’s a strategy that sets apart those who make modest investor returns from those who become stock market millionaires.
Making millions from UK shares
The FTSE 100 and FTSE 250 have made no gains over the summer. The steady spread of Covid-19 and fears over fresh lockdown measures mean that dip buyers remain thin on the ground. Other fears, like US-led trade wars, Brexit and political uncertainty in Washington, are also hampering demand for UK shares.
This lack of dip buying is a wasted opportunity for share investors to make serious money. It’s no coincidence that the number of ISA millionaires ballooned in the wake of the 2008/09 banking crisis. These individuals bought UK shares just after that stock market crash, and watched the value of their investments rocket as economic conditions improved and earnings rose.
The FTSE 100 doubled in value in the decade following the sub-prime mortgage crisis in the US. Those who bought when the Footsie struck its lows of 3,500 points in February 2009, and then watched it surge to record tops of 7,550 points less than 10 years later, made an absolute killing. The 2020 stock market crash presents an opportunity for you and I to follow a similar path.
You can get rich after the stock market crash
There’s plenty of economic, geopolitical and social uncertainty out there, sure. But stock investors can reduce the near-term risk to their share portfolios by following a few simple tips. Buying UK shares with strong balance sheets to help them survive a global recession, for example, is a good idea. So is picking stocks with competitive advantages (or ‘economic moats’) that will help them outlast their rivals. Examples of this include lower cost bases, better brand power or superior products.
Stock market volatility is nothing new. And it’s nothing that should discourage long-term investors from continuing to buy UK shares. The evidence shows that those who buy shares with a view to holding them for five, 10, 20 years or more make a mighty average annual return of 8% to 10%. Compare that with the paltry returns offered by sub-1%-yielding Cash ISAs, for example.
You can significantly improve your chances of hitting that magic 10% marker by buying after stock market crashes. There are plenty of high-quality UK shares trading too cheaply following recent panic-selling. By buying them today you watch them steadily climb in value during the recovery phase of the economic cycle. And you could possibly become a stock market millionaire in the process.
The post Stock market crash: why I’m buying cheap UK shares in an ISA to make a million 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