A stock market crash is the perfect time to go shopping for my favourite FTSE 100 stocks. Why? Because all those companies I’ve been thinking about buying are suddenly available at bargain valuations.
So I won’t waste my chance when the next stock market crash comes along. But this also raises a tricky question. Should I only ever go shopping for shares in a correction?
This question is particularly pressing right now, as the doomsayers are out in force again, warning we’re in a stock market bubble that looks set to burst. Should I react by holding off on my stock purchases until the crash comes?
I’m not waiting for the stock market crash
US billionaire investor Warren Buffett loves going shopping for shares while they’re cheap. We know that from the second part of what is probably his most famous quote: “The time to get greedy is when others are fearful.”
It isn’t easy to go against the crowd like that. Believe me, I’ve tried. All my instincts were to be fearful, just like everyone else. That’s how humans are. When the recovery came (usually faster than I expected) I kicked myself for failing to be greedy enough. I bet everybody else did too.
I should have followed another piece of Warren Buffett advice: “Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble.” I’ll be doing my best, next time we get a stock market crash.
So back to my original question. Should I keep my powder dry and wait for the collapse? There’s an obvious problem with this strategy. Anybody can say the stock market is about to crash, the impossible part is saying when it will happen. Nobody can successfully second-guess stock market movements, so please ignore those who claim they can.
The best investors, like Warren Buffett, know they are helpless in this respect. As the ‘Sage of Omaha’ said: “I never have an opinion about the market because it wouldn’t be any good and it might interfere with the opinions we have that are good.”
I’m listening to Warren Buffett
So I could stand on the sidelines for a long time, waiting for the stock market to crash. In the meantime, I’ll miss out on any growth and dividends, while my money earns next to nothing in the bank. History shows that bull runs can persist for long after people have started warning that markets are in bubble territory.
I’m not wasting time predicting stock market movements, because I know I’ll get it wrong. So I’m investing today, whenever I have money to spare. That’s because I’ve got no idea what the market will do tomorrow. Right now, I can see plenty on the FTSE 100 to tempt me.
If the stock market does crash, I’ll just invest more.
