Why I’m looking at the FTSE 100’s crash as a fantastic investment opportunity

A look at the FTSE 100’s (INDEXFTSE: UKX) history tells us that the best time to invest in shares is when economic uncertainty is elevated.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

A look at the FTSE 100’s history tells us that the best time to invest in shares is when economic uncertainty is high and stock prices are low. For example, had you bought shares at the height of the Global Financial Crisis in late 2008, you could have made an absolute mint over the next five years. Similarly, had you invested in early 2003 – when geopolitical tension between the US and Iraq was elevated – you could have cleaned up in the years after.

Economic uncertainty is at sky-high levels right now due to the coronavirus pandemic. And many FTSE stocks are down significantly year to date. So I believe we could be looking at another great long-term investment opportunity. Stocks could remain volatile in the short term, of course, and the situation could get worse before it gets better. However, I’m convinced that in the long run, those buying shares now should be rewarded.

FTSE 100 bargains

Scanning the UK stock market, I’m certainly seeing some attractive opportunities. For example, alcoholic drinks legend Diageo, which is poised to benefit from rising wealth in the emerging markets over the next decade, is down roughly 18% this year. Similarly, software company Sage, which has considerable long-term growth potential, is also down about 18%. Meanwhile, insurer Prudential, which looks set for powerful growth due to its exposure to Asia, is down over 25% year to date. My belief is that in five-to-10 years’ time, the current share prices of these FTSE 100 stocks will look like absolute bargains.

Putting my money to work

I’ve certainly been putting my own money to work recently in the wake of the stock market crash. I’ve bought more Diageo and Sage for my portfolio. But I’ve also bought shares in online broker Hargreaves Lansdown and hip and knee replacement specialist Smith & Nephew. In addition, I’ve bought shares in JD Sports Fashion and FTSE AIM 100 online retailer ASOS. Both were absolutely crushed in the recent market sell-off.

It’s early days, but so far, the results have been pretty good. ASOS, in particular, has been a great purchase – it’s up around 90% since I bought it in mid-March.

FTSE stocks could fall further

Of course, FTSE 100 shares could fall again in the near term. I wouldn’t be surprised at all if we see another leg down before a sustained stock market recovery. Research by Stockomendation, says that in 15 bear markets since 1950, only one didn’t see the initial major low tested within three months of a rally.

Given the high level of uncertainty, I believe that the best approach to investing right now is to drip-feed money into the market over time. You could dump a whole lot of money into stocks at once. But I think it’s sensible to buy small amounts of shares at regular intervals. That way, if FTSE 100 stocks do fall further, you’ll be able to take advantage of the lower share prices on offer.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be considered so you should consider taking independent financial advice.

Edward Sheldon owns shares in Diageo, Sage, Prudential, JD Sports Fashion, ASOS, Hargreaves Lansdown and Smith & Nephew. The Motley Fool UK owns shares of and has recommended ASOS. The Motley Fool UK has recommended Diageo, Hargreaves Lansdown, Prudential, and Sage Group. 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.

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