You don’t have to look far before coming across famous investors predicting that there’s a stock market crash around the corner.
Take legendary British investor, Jeremy Grantham, for example. He believes the market has a 70% chance of crashing.
Across the pond, The Big Short investor, Michael Burry, is betting heavily on a market downturn in the US.
Burry made a fortune by predicting the collapse of the American housing market in 2008 and, as of the end of the second quarter of 2023, he held negative options on both the S&P 500 and Nasdaq 100.
Despite the predictions of these investing giants, the prospect of a stock market crash in 2023 won’t deter me from buying undervalued UK shares for my portfolio. Let me explain why.
Opportunity amid chaos
Famous billionaire investor Warren Buffett stands by the principle of being greedy when others are fearful. And there’s perhaps no other time during which others are more fearful than a stock market crash.
The panic caused by volatility in financial markets often creates an environment where prices plummet due to panic selling.
In spite of the chaos, this presents an opportunity for savvy investors to buy high-quality shares at significantly discounted prices.
In any case, history demonstrates that the stock market eventually recovers from crashes and downturns.
On top of this, companies with strong fundamentals tend to recover and grow over time. This process delivers value to patient investors who were greedy when everyone else was fearful.
Resilience in certain industries
Furthermore, it’s worth noting that not all industries are equally affected by stock market crashes.
In fact, certain sectors can prove relatively resilient due to the nature of their businesses or their ability to adapt to changing market conditions.
For example, defensive industries such as healthcare, utilities, and consumer staples tend to be less impacted by economic downturns.
After all, people will always need essential goods and services even during challenging macroeconomic conditions.
As such, by investing in companies such as AstraZeneca, National Grid, and Unilever, I could provide my portfolio with an additional buffer against the extreme volatility caused by a potential stock market crash.
The long-term perspective
I see investing as a long-term endeavour. By this I mean that I’m looking to buy and hold shares for anywhere between 10 and 30 years.
This is important because stock market crashes are usually short-lived events in the grand scheme of an investor’s journey. As a result, the impact of a 2023 market crash on my selection of undervalued UK shares should only be temporary.
By playing the long-term game, I’ll be well equipped to ride out the inevitable peaks and troughs of the market.
And since I’m prepared to consider industry resilience, seize the opportunity amid market chaos and embrace a long-term perspective, I’m not put off the thought of buying cheap UK shares today.
