Stock market crash: I’d listen to Warren Buffett and buy cheap UK shares to make a million

Following Warren Buffett’s lead in buying cheap stocks after a market crash could improve your chances of making a million, in my view.

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.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The recent stock market crash may have dissuaded some investors from buying UK shares in their quest to make a million. Their volatile performance and uncertain outlook may mean investors are holding cash or other lower-risk assets.

However, buying undervalued shares after a market decline could prove to be a sound move. It’s a strategy that’s been used successfully in the past by star investors such as Warren Buffett. Through purchasing high-quality businesses when they trade at low prices, you can use the stock market cycle to your advantage.

Booms and busts

The recent market crash clearly caught most investors by surprise. However, a decline in stock prices is, in itself, relatively common. In fact, indexes such as the FTSE 100 and FTSE 250 have never produced uninterrupted growth. Instead, they’ve experienced periods of boom and bust that provide investors with the opportunity to buy stocks at low prices. And sell them later on at higher prices.

Clearly, buying undervalued UK shares when the economic outlook is challenging is a difficult task. Investors may experience paper losses in the short run, since it’s almost impossible to accurately determine when the market will produce its next recovery.

However, with it having a strong track record of doing so, you can increase your chances of generating high returns from the stock market simply by adopting a long-term stance. This may help you to look beyond any short-term disappointment, and to focus on the potential for share price turnarounds.

Buying shares after a market crash

Following Buffett in buying shares after a market crash may help to increase your chances of making a million. However, this task could be further boosted by adopting his strategy when it comes to which stocks you decide to purchase.

For example, Buffett has always focused his capital on a relatively narrow range of industries. In doing so, he ensures that he fully understands what makes them tick. This may improve his capacity to identify the strongest companies within a specific sector, which could enhance his overall returns.

Furthermore, Buffett focuses on stocks that have a competitive advantage over their peers. For example, they may have a unique product or a lower cost base than their rivals. This may increase their chances of surviving a tough economic period after a market crash. And that could also boost their chances of increasing market share to generate improving profitability.

An uncertain future

Clearly, there’s a chance of a second market crash should investor sentiment weaken in the coming months. Aim to purchase high-quality UK shares in sectors that you understand for the long run while they offer good value for money. That way you could increase your chances of making a million.

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 assessed. Consider taking independent financial advice.

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.

More on Investing Articles

pensive bearded business man sitting on chair looking out of the window
Investing Articles

Would a stock market crash matter?

Christopher Ruane explains why a stock market crash could turn out to be positive, not negative, for a private investor…

Read more »

Investing Articles

Has the Rolls-Royce share price peaked?

After a strong 2023 performance and (so far) in 2024, the Rolls-Royce share price has stuttered in recent days. Christopher…

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

Turning a £20k ISA into a £13,900 yearly second income? It’s possible!

By investing a £20k ISA now using certain basic principles, our writer thinks he could set up a second income…

Read more »

Fans of Warren Buffett taking his photo
Investing Articles

With no savings, I’d follow Warren Buffett’s number one rule to build wealth

Can this one piece of Warren Buffett wisdom really help our writer as he aims to build wealth in the…

Read more »

Storytelling image of a multiethnic senior couple in love - Elderly married couple dating outdoors, love emotions and feelings
Investing Articles

A second income of £1k a month from just £10 a day! How would I do that?

Mark David Hartley considers how to build a second income stream starting from just £10 a day. Is £1,000 a…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

Turn £8,900 into a £24k annual passive income? Here’s how!

Christopher Ruane applies some investing lessons from billionaire Warren Buffett when explaining how he'd aim to earn sizeable passive income…

Read more »

Young Caucasian woman holding up four fingers
Investing Articles

7%+ dividend yields! 4 FTSE 100 shares for investors to consider buying in April

These FTSE shares offer dividend yields comfortably above the index average of 3.7%. Here's why they could be good passive…

Read more »

Dividend Shares

£10k in an ISA? Here’s how to generate a ton of passive income

Passive income can provide a lot more financial freedom and security. Here’s an easy way to generate some within an…

Read more »