What should we do if there’s a fresh stock market crash in 2024? I know what I’ll do. I’ll buy as many cheap shares as I can afford.
I’ll never understand why people sell shares after they’ve slumped. What do they plan to do, wait until they go back up again and buy them at a higher price?
I’m sure nobody wants to do that, but it’s what happens to a lot of folk. So I’ll be contrarian, and buy when everyone is selling.
Seek safety? Pah!
What’s the next thing stock investors do when prices are tumbling? They seek safety in robust companies doing essential things. But isn’t that like checking where the lifebelts are stowed after the ship has sunk?
I like safe stocks. But I reckon the time to buy them is all the time, not after a disaster.
That’s contrarian approach number two. I’ll look for the best buys among riskier stocks, because those are more likely to fall further.
Contrarian again
And I plan to go against the crowds a third time, by throwing out one of the City’s main rules.
I intend to forget about diversification. Is that a crazy thing to do?
Usually, it’s a big part of my strategy. It’s a great way to spread the risk of a single sector collapse. Those who were heavily into banks could have lost a bundle when the financial crisis hit in 2007.
I held just one bank stock, in a diversified ISA, and that pacified the pain.
Cheap financials
Most financial stocks look cheap to me today. And in a stock market crash, I reckon they’ll stand a good chance of getting even cheaper.
So doesn’t it make sense to stock up on the best value sector? I think it does. But if I do turn away from diversification, it will only be for a short time.
And it’ll only be for new buys — I won’t be selling any non-financial stocks I already hold.
Take some risks
I know I’ll be taking risks. Some of the biggest fallers in a stock market crash can end up in big trouble and stay low for a long time. Or even go bust.
Going for one sector clearly adds risk. And I’d only do it as a short-term part of my long-term strategy.
Also, financial stocks have been low for years now. So my judgment that they’re undervalued might be wrong.
But, with all that in mind, which ones would I buy?
Banks look cheap
It depends a lot on which stocks fall the most and look the best value. But right now, I like the look of Barclays, on a forecast price-to-earnings (P/E) ratio of only 4.5 and a 5.3% dividend yield.
Then there’s Legal & General with a 9.4% dividend. And M&G‘s predicted yield is over 10%.
Things might change, forecasts might be cut, and they might not look quite as good in a crash. But these are among the cheap stocks I’ll be looking at first.
