The main stock indices such as the FTSE 100 and the FTSE 250 have been a little volatile recently. However, so far, there’s been no great stock market crash, as many feared there might be.
A correction by stealth
But below the surface, many individual share prices have eased back a fair bit. And we’ve been seeing what could be described as a stealth correction.
However, these things can be transient. A stock market recovery often follows a correction or a crash. Indeed, just this morning I saw headlines such as these:
“European stock market advances as energy price surge eases”
“British shares rebound on mining, travel stocks boost”
Investor sentiment never ceases to amaze me with its ability to handbrake turn. And I’m mindful of the old adage that there’s always something to worry about, and stock markets tend to climb a wall of worry.
So for me, the best course of action in uncertain times is to simply carry on with my investment process. And that means researching to find businesses with quality, growing operations. I then put them on my watch list and aim to buy some of their shares when the market offers me a fair valuation when measured against the company’s prospects.
And we often see the keenest valuations when there’s something to worry about and sentiment has been against shares. That’s why investors such as Warren Buffett tend to go shopping for stocks when the economic clouds are in the sky. And the idea then is to embrace the short-term risks in pursuit of longer-term gains.
UK shares I’d consider buying now
Right now, I’m keen to take advantage of the recent stealth correction by investing £5k in UK shares for October 2021 and beyond. And there are several stocks I’d choose between. For example, among big-cap stocks in the FTSE 100, I like the look of energy company National Grid and equipment rental provider Ashtead.
In the mid-cap space, I’m keen on kitchen and joinery products provider Howden Joinery and fluid control device specialist IMI. Among small-cap companies, I like mortgage and insurance advisor Mortgage Advice Bureau and soft drinks maker AG Barr.
All these UK shares have declined in the stealth correction and I’d take that as a jumping-off point for my further, thorough research. However, they could continue to decline and operational challenges within the underlying businesses could yet emerge. Indeed, all shares carry risks.
However, I’m inclined to embrace the unknown with the aim of holding stocks like these for a long period. And my plan would involve buying a diversified portfolio of positions to hold for five or more years. But even then, good returns are not certain or guaranteed. If I want certainty, I’ll put my money in a cash savings account — and then be certain of poor, below-inflation interest!
Kevin Godbold has no position in any of the shares mentioned. The Motley Fool UK has recommended AG Barr, Howden Joinery Group, IMI, and National Grid. 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.