With all the stock market turmoil endured in 2022, finding millionaire-making UK shares in December may seem like a far-fetched dream. Yet for patient investors, capitalising on cheap valuations could be a lucrative decision in the long run. After all, fortunes are made in stock market recoveries.
Despite countless analysts attempting to predict where the markets are going in the coming months, there’s no real way of knowing. Investors could be entering a period of further volatility, or the recovery may have already started.
Regardless, history has shown time and time again that buying high-quality at a low price tag is a proven recipe for sustainably building wealth. And over the long term, a modest investment can transform into a surprisingly large nest egg. It may even reach the seven-figure territory.
Top shares can survive the storm
There are many factors at play that need to be considered before committing to an investment. And one of the most critical, especially during economic wobbles, is financial health.
Regardless of how promising or revolutionary a company may be, the point becomes moot if it can’t keep the lights on. When consumer spending is in free fall, even business-facing enterprises are affected. After all, they may not be selling to consumers, but their clients could be, which passes on the reduced demand.
The end result is cash flow becoming restricted. And this impact is only amplified by rising interest rates pushing up the cost of having debt. This is obviously far from ideal. But the UK shares with a hefty war chests of cash probably aren’t breaking a sweat.
Revenue and earnings growth may be struggling due to the current operating environment. However, by having a balance sheet flooded with liquidity, these well-funded businesses can easily survive the chaos. What’s more, they might even be able to capitalise on the weakened state of their competitors and steal market share.
Finding bargains
Under normal conditions, finding cheap stocks isn’t an easy task. Corporate valuation is a bit of a rabbit hole, and even professional investors struggle with it. Yet when a stock market correction turns up, the difficulty of spotting bargains plummets.
When volatility goes up, emotional discipline goes down the drain. And in 2022, most investors have been selling off anything with a pulse to try to mitigate losses. This indiscriminate selling activity has led to countless fantastic businesses seeing their valuations slashed. That’s despite the underlying fundamentals remaining rock-solid.
By finding the companies whose business model remains uncompromised with a falling share price, investors can tap into potentially excellent long-term investments. In fact, even if these shares just match the average 8% return of the FTSE 100, a £1,000 monthly investment would turn into a million within roughly 25 years.
Of course, another crash or correction will eventually rear its ugly head during this waiting time. And such an event will undoubtedly delay the journey to becoming a millionaire. But just as the 2022 correction is creating fantastic buying opportunities in UK shares today, future volatility will likely do the same.
