After Thursday’s global mini stock market crash, UK shares are now even cheaper. This gives long-term investors a great opportunity to buy their favourite companies at reduced prices. If you’re looking to make a million from investing, you won’t want to miss this chance.
The FTSE 100 fell 1.5% yesterday, but UK shares actually held up relatively well. In the US, the S&P 500 fell 3.5%, while the NASDAQ tech index plunged a hefty 4.96%.
The US tech titans have been flying for years but they took a beating yesterday. Apple fell 8%, Microsoft dipped 6.2%, and Amazon slid 4.6%. Some will see this as a buying opportunity, but I prefer to focus my firepower on UK shares right now.
I’d buy UK shares today
The FTSE 100 has underperformed international rivals lately, as the UK has been hit particularly hard by Covid-19. The economy plunged 20.4% in the second quarter, a worse performance than almost any other major country.
Since the start of the year, the NASDAQ is up a staggering 33.9%, while the S&P 500 is up 8.3%. By contrast, UK shares are still down 21%, figures from Tilney Investment Management Services show. It says this is partly down to the UK’s lack of tech exposure, as the sector makes up just 1.3% of our market. Instead, we’ve plenty of energy and financial companies, which have been hit hard.
I believe the best time to buy UK shares is when they’re cheap, rather than expensive. This is harder to do than it sounds. There are good reasons why the country’s stock market is out of favour right now. As well as enduring a bad pandemic, we also face the small matter of Brexit looming ever closer. The chances of a deal with the EU have now fallen to around 40%, according to some calculations. Massive uncertainty lies beyond.
FTSE 100 bargains in the stock market crash
Who would buy UK shares in such circumstances? Actually, I would. Provided you are willing to hold for the long-term.
Once again, I’m reminded of what’s possibly the world’s most famous maxim from the world’s most famous investor, Warren Buffett: “The time to be fearful is when others are greedy, and the time to be greedy is when others are fearful.”
These are fearful times for investors, so you know what to do. Get your greed on. This doesn’t mean snapping up every UK share bargain you see. There are some dirt-cheap stocks out there, but some are cheap for a reason. British Airways owner International Consolidated Airlines Group is trading at just two times earnings. But I’d be cautious, given the chaos afflicting the travel sector.
There are others I’d consider right now. Fund manager M&G, insurer Aviva, BT Group, ITV and cigarette maker Imperial Brands all now trade at less than five times earnings. I might not buy all of them, but they deserve closer examination.
I believe it’s possible to make a million from investing in UK shares, provided you start early and stick with it. Especially if you buy shares when they are cheap, like now.
