As the stock market continues to take a battering, it’s impossible to tell what each day may bring. High levels of uncertainty combined with substantial losses in financial markets represents a bitter pill to swallow for many investors.
However, those with a long-term horizon need not panic. In fact, I believe this market crash presents an opportunity to buy shares in good quality companies that are trading on cheap valuations. Invest wisely and this could lead to attractive returns over the next five-to-10 years.
With that in mind, here’s why I think you should continue investing in FTSE 100 companies during this market crash.
A big hit
Since the beginning of the year, the FTSE 100 index has shed around 30% of its value. The story has been much the same for stock market indices around the world. The effects of Covid-19 have rampaged through global markets causing investors to flee to safe-haven assets.
As investors struggle to weigh up the economic impact of the virus, many companies in the FTSE 100 are now trading on valuations well below just a month ago.
Value to be had
This indicates that there is value to be had. Stocks in many British companies are far cheaper now than they were just five weeks ago!
On top of this, plenty of these companies have quality business strategies with healthy balance sheets and promising platforms for growth.
Ultimately, these are the companies in the strongest position to weather the financial storm and continue to grow into the future.
Where to begin?
For now, I would focus on firms that fit this description, as they seem best placed to bring significant returns once business returns to normal.
Take companies like Aviva and Legal & General as examples. Both posted impressive full-year results and are in a strong position to rebound from the effects of the virus.
Feeling particularly bullish about the recovery of the struggling airline operators? For those with a high risk tolerance, I’d consider shares in easyJet and International Consolidated Airlines Group, which may be due a rebound after trading around 60% and 50% lower respectively.
The perfect time to invest
Ultimately, not allowing yourself to get caught up in the drama has never been so important. The worst thing any investor can do right now is to turn a paper loss into a real one by selling their holdings.
The real rewards of investing come through having a long-term horizon. To put it simply, buying stocks in this market crash could truly be the perfect time to invest. After all, some of today’s bargains could turn into the big winners of tomorrow! Why miss out on that opportunity? Here are some wise words from @themotleyfool:
Tomorrow is a coin toss.
Next week is a wild guess.
This year is a shot in the dark.
The next five years, we feel good about.
The long run, we feel great about.
— The Motley Fool (@themotleyfool) March 26, 2020
What’s more, doing all of this via a Stocks and Shares ISA provides the added benefit of a tax-free wrapper. All things considered, now could truly be the best time to invest in quality companies — at a reduced price — for decades!
Matthew Dumigan has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.