Risks such as Brexit, the US election and coronavirus mean a second stock market crash could realistically occur in the coming months. This could cause some investors to become fearful about the prospects for their portfolio. However, it could prove to be a buying opportunity for long-term investors.
Buying UK shares at a slow pace, rather than piling in, could be a sound means of capitalising on a market downturn. It may mean you’re able to take advantage of what could be a prolonged period of uncertainty for the world economy.
Buying UK shares slowly in a stock market crash
The recent stock market crash started and finished extremely quickly. Indexes such as the FTSE 100 and FTSE 250 went from being in a bull market to a bear market and back to a period of growth within a matter of weeks.
However, many previous stock market declines have taken place over a much longer timeframe. For example, the dotcom bubble and the global financial crisis took many months to fully play out. Even when it seemed as though share prices could not fall any further, they dropped to new depths in both of those crises.
Therefore, buying UK shares slowly could be a sound strategy to take advantage of a second stock market crash. It may enable you to access lower prices as the situation unfolds. This may also help you to remain optimistic about your portfolio’s prospects. That’s because further stock market falls present even more attractive buying opportunities.
Adopting a long-term mindset
Of course, buying UK shares in a stock market crash is easier said than done. It requires a significant amount of willpower to buy any asset that’s falling heavily in price. It takes even more self-discipline to buy more shares after previous purchases have fallen in value in a short space of time.
However, you can make this process easier by adopting a long-term mindset when investing your money. Indeed, current economic and political challenges may prompt a market decline. And it could take many months for this situation to give way to more positive operating conditions.
Therefore, having modest near-term expectations and being able to look beyond paper losses could lead to higher returns in the long run. It may enable you to fully benefit from a likely long-term stock market recovery.
Clearly, there’s no guarantee a second stock market crash will take place in the coming months. However, the past performance of UK shares suggests a market downturn is likely over the long run. By purchasing a diverse range of shares in small amounts on a regular basis during the very worst of any future bear market, you could maximise your long-term capital gains.
