Stock market crash: why I’m buying shares NOW

The stock market has been very volatile in 2022. Edward Sheldon is taking advantage of this turbulence and buying shares now.

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.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The stock market has been highly volatile this year. While the UK’s FTSE 100 index hasn’t taken too much of a hit to date, some areas of the market have been decimated. The tech-focused Nasdaq Composite index, for example, is down around 15% for the year, and is now not far off ‘bear market’ territory.

Has this volatility created a buying opportunity? I think it has. So I’ve been buying shares for my own portfolio over the last few weeks. Here’s a look at four reasons why.

Huge share price falls

The first reason is that many stocks are well off their recent highs. This is particularly true in the tech sector where a lot of top companies are down 30% or more from their 52-week highs. A great example here is PayPal, which is one of the world’s biggest players in the electronic payments space. Its share price is currently down about 50% from its 2021 high.

That fall seems excessive, to my mind. When I’ve invested in high-quality companies after big drops in the past, I’ve generally been rewarded.

Attractive valuations

The second reason is that, after recent share price falls, valuations now look far more attractive. Going back to PayPal, it currently trades on a forward-looking P/E ratio of under 30. Not so long ago, it was trading on a P/E of around 60.

I think a P/E ratio of 30 for PYPL is very reasonable given the company’s track record, user base (400m+ users), and growth potential in today’s digital world. At that multiple, I see a lot of value on offer.

Panic selling

Another reason I’m buying now is that we’ve seen a fair bit of panic selling over the last week or so. On Monday, the Nasdaq Composite index was down nearly 5% at one stage, with many tech stocks down 10%, or more.

This kind of volatility indicates investors are in ‘fear’ mode. That’s a positive for a long-term investor like me, because I can take advantage of this fear. As Warren Buffett says, the best way to make money from stocks is to be ‘greedy’ when others are ‘fearful’.

The pros are buying

Finally, it’s worth noting that many professional money managers have been investing capital over the last week. I tend to watch a lot of fund manager interviews on CNBC and nearly all of the pros I’ve seen this week have said they’ve put some money to work in the recent market turbulence. The fact that the ‘smart money’ is buying now is very encouraging, to my mind.

How I’m buying shares 

Of course, there’s every chance that stocks could fall further in the near term. I personally expect this volatility to last for a while, due to the uncertainty over interest rates.

Therefore, while I am buying shares now, I’m not going ‘all-in’ on stocks at the moment. Instead, I’m drip-feeding my cash into the market slowly, taking advantage of opportunities when I see them. I want to retain some cash on the sidelines, in case share prices go lower.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Edward Sheldon owns shares in PayPal Holdings. The Motley Fool UK has recommended PayPal Holdings. 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.

More on Investing Articles

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

2 overlooked cheap shares I’m tipping to eventually soar

These two cheap shares may not be obvious bargains, but our writer explains the investment case behind buying them for…

Read more »

Investing Articles

1 no-brainer pick I’d love to buy for my Stocks & Shares ISA!

A Stocks & Shares ISA is a great investment vehicle for our writer. Here she explains why, and one stock…

Read more »

Shot of a senior man drinking coffee and looking thoughtfully out of a window
Investing Articles

Just released: our 3 best dividend-focused stocks to buy before May [PREMIUM PICKS]

Our goal here is to highlight some of our past recommendations that we think are of particular interest today, due…

Read more »

Investing Articles

Will the Rolls-Royce share price keep rising in 2024?

With the Rolls-Royce share price going on a surge, this Fool wants to look forward to where it could potentially…

Read more »

Investing Articles

£10k in an ISA? Here’s how I’d target a regular £30k+ second income stream

Reliable dividends can help provide a lot more financial freedom. Here's how I'd aim for a substantial second income inside…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

Lloyds share price hanging on to 50p ahead of Wednesday’s Q1 earnings report. Where to now?

Down in April and with low earnings expected this week, Mark David Hartley investigates where the Lloyds share price might…

Read more »

artificial intelligence investing algorithms
Investing Articles

Everyone’s talking about AI! Here’s 1 FTSE stock to consider buying for exposure

A hot topic right now is artificial intelligence (AI). This Fool explains how this FTSE stock could offer investors an…

Read more »

British Pennies on a Pound Note
Investing Articles

1 penny stock I’d buy today while it is 99p

Ben McPoland highlights Windward (AIM:WNWD), a fast-growing penny stock that could benefit from the artificial intelligence revolution.

Read more »