The Motley Fool

I used to be afraid of a stock market crash. Now I look forward to them

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.

Tired or stressed businessman sitting on the walkway in panic digital stock market crash financial background
Image source: Getty Images

Who’s afraid of a stock market crash? I used to be, when I first started investing in shares and funds. Not so much now.

I’m sure I’m not alone. Most novice investors assume a stock market crash must be a bad thing. It sounds logical. Who wants to see the value of their portfolio – or any other asset – drop by up to a third in a matter of days or weeks? That’s going to hurt. So why am I so calm about the prospect?

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

I started investing seriously at the end of the technology boom of the late 1990s, and got my fingers badly burnt. I pumped what was for me a big sum into the all-conquering Aberdeen Technology fund. Then I threw another chunk at Aberdeen European Technology, thinking that counted as diversification. Within a month, both had crashed and never recovered.

I’ve learned from my tech fund disaster

I have seen plenty of stock market crashes since then, and got through them pretty well. How come? First, my portfolio is now widely diversified. Instead of being top-heavy with tech stocks, I’m spread across a range of global markets, sectors and indices, with a bias to UK shares.

While my portfolio is 85% in shares, I also have some exposure to bonds, crypto and gold. That helps limit my losses in the heat of a stock market crash, so it doesn’t hurt quite so much.

Another thing I do is keep my eyes focused on the long term. I plan to remain invested in shares for life, taking money as required through drawdown. More and more investors do that now. When I started out, most people expected to switch into lower-risk bonds in their late 50s and early 60s, in preparation for buying an annuity at 65. Not any more.

I’ll turn the next stock market crash to my advantage

Investing for the long term means I don’t have to worry about a short-term stock market crash. I will just wait for markets to recover, as they have always done in the past. When I approach retirement, I will build up a pot of cash, so I don’t deplete my portfolio by drawing money in the middle of a crash.

There’s another reason why I actively look forward to a stock market crash. I treat this as an opportunity to go shopping for shares at the new reduced price. It’s a trick I learned from writing for The Motley Fool. When markets crash, we urge users to go bargain-hunting. We think it’s an unmissable opportunity to pick up top stocks, when they’re going cheap. Or even to load up on an index tracker.

Gains aren’t guaranteed, of course, and not all shares recover evenly, which is why diversification is important. But history shows that in the long run, stock markets rise, plus I get dividends as well. So I see a crash as an opportunity, not a threat. I plan to take advantage, next time one comes along.

I'd buy this stock today.

The high-calibre small-cap stock flying under the City’s radar

Adventurous investors like you won’t want to miss out on what could be a truly astonishing opportunity…

You see, over the past three years, this AIM-listed company has been quietly powering ahead… rewarding its shareholders with generous share price growth thanks to a carefully orchestrated ‘buy and build’ strategy.

And with a first-class management team at the helm, a proven, well-executed business model, plus market-leading positions in high-margin, niche products… our analysts believe there’s still plenty more potential growth in the pipeline.

Here’s your chance to discover exactly what has got our Motley Fool UK investment team all hot-under-the-collar about this tiny £350+ million enterprise… inside a specially prepared free investment report.

But here’s the really exciting part… right now, we believe many UK investors have quite simply never heard of this company before!

Click here to claim your copy of this special investment report — and we’ll tell you the name of this Top Small-Cap Stock… free of charge!

Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.