Stock market crash: I’d buy UK shares now despite recent volatility

Despite recent volatility, I’d continue to buy UK shares, even if there is another stock market crash, writes Thomas Carr

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.

Despite being well into the Covid-19 crisis and hopefully past the worst of the subsequent stock market crash, the last month has shown that UK shares will continue to be volatile for the time being. The backdrop to these swings is a never-ending stream of news stories. Some of which are positive and others negative. With such a barrage of news stories, it’s hard to form an accurate view of what’s actually happening and what that means for UK shares.

UK shares volatile

The result of this uncertainty is that stock prices swing wildly. We saw this at the beginning of the crisis back in March. Recently, it looks like volatility has returned. Until there’s proof that an effective vaccine is imminent, I think we’re going to continue to see significant swings in stock prices.

It feels to me like there are more negative news stories lurking just around the corner. These have the potential to send UK share prices back to where they were in March and April. Another stock market crash could mean falls of up to 50% in some cases. But we should view this as an opportunity.

Sure enough, in time, there will be a solution to this crisis. We just don’t how long it’s going take and what the damage will be in the meantime. But when sentiment becomes more optimistic again, stock prices will rise. In the long run they could rise significantly. This would reward those investors that take the risk of buying UK shares amidst heightened uncertainty.

Opportunities abound

Bearing that in mind, I think there are, and will be, more great opportunities to be had for investors to pick up great companies at bargain prices. But we need to exercise caution. I think it’s prudent to stay away from the riskiest areas, such as tourism and real estate.

Instead, I’d focus on quality companies that have produced solidly profitable results during the crisis. Aviva, Prudential and Mondi have all recently announced very respectable results for the first half of the year, especially given the circumstances. Prudential’s pre-tax profit was just 3% lower than the same period last year. While Aviva managed to report net profits of almost £900m.

These are all high-quality companies, that will endure through the toughest of lockdowns. And they could even emerge from the crisis stronger than they were before.

Some companies have also recently reinstated hefty dividends. Direct Line and Mondi (again) have both not only returned to dividends for this financial year, but also declared catch-up dividends to compensate for those cancelled from the last financial year. Meanwhile, BAE Systems has reinstated its previously deferred dividend, giving a yield of around 5%.

In the current investment climate, those companies that can pay out juicy dividends will be highly sought after. They are some of the strongest companies in the UK. They also seem cheap, with their share prices still impacted by the wider market sentiment, which is why I think they are among the best UK shares right now. If there is another stock market crash, they could be cheaper still. I think these are exactly the kind of UK shares that we should be rushing to buy.

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.

Thomas owns shares of Aviva and BAE Systems. The Motley Fool UK has recommended Prudential. 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

Investing Articles

With an 8% yield and a P/E below 12, Taylor Wimpey looks in deep value territory

Harvey Jones wants to make a bit of noise about Taylor Wimpey shares. The FTSE 100 stock may be volatile…

Read more »

A young Asian woman holding up her index finger
Investing Articles

Up 8% today, is this one of the FTSE 100 best growth shares to buy?

Looking for the best FTSE 100 growth shares for a winning portfolio? This soaring blue chip is worth serious consideration,…

Read more »

Investing Articles

With yields over 7%, here are two FTSE 100 dividend shares to consider in 2025

As the FTSE 100 trades near all-time highs in 2025, some of its top dividend shares still offer highly attractive…

Read more »

Investing Articles

Here’s why Coca-Cola HBC stock jumped over 9% in the FTSE 100 today

This stock was flying to a record high in the FTSE 100 today, boosted by a strong set of earnings.…

Read more »

Investing Articles

1 FTSE 100 stock an investor consider for a Stocks and Shares ISA if Cash ISAs get canned

The talk in the papers is of the Cash ISA getting axed, but the Stocks and Shares ISA seems secure.…

Read more »

Chalkboard representation of risk versus reward on a pair of scales
Investing Articles

A 5.5% dividend forecast? £2k invested in Lloyds shares could earn an investor this much by 2027

Jon Smith talks through the dividend forecast for Lloyds stock in the coming years and weighs up whether it could…

Read more »

Investing Articles

How much in savings would investors need to target a £3,000 monthly passive income?

Our writer outlines a simple recipe to earn passive income from shares. The ingredients include diligent saving, ample time and…

Read more »

Investing Articles

The average Stocks and Shares ISA turned £10k into £25k in a decade. I aim to beat that

Harvey Jones is impressed by the long-term total return on the average Stocks and Shares ISA. Yet he still reckons…

Read more »