We are in the middle of a global pandemic, and stock markets are crashing all around. The uncertainty is unprecedented. Until a vaccine or cure is found, governments are operating in unknown territory.
Previous stock market crashes have been financial in nature. A bubble of too much debt in the housing market caused the 2008 financial crisis. Oversold tech companies caused the dot com bust in 2001. Black Monday in 1987 is thought to have been caused by the introduction of computer trading, among other factors.
The plunging markets we’re seeing today are different because an external factor has caused them to fall. An unforeseen health crisis put economies on hold. This means that when the recovery happens, it should be rapid.
Recovery from a crash could throw up long-term growth prospects. This means investors who buy during a financial crash may reap the rewards of low valuations, which could help them become rich. Previous stock market recoveries have shown time and again the potential for millionaires to emerge from the wreckage.
Will the market crash continue?
Many analysts believe the markets have further to fall given the brutality of global economic and financial shocks the coronavirus pandemic has created.
It’s important to remember financial crashes create buying opportunities for savvy investors.
Billionaire investor Warren Buffett has said he’ll be looking for bargains during this market tumble. He has decades of experience in investing, and his past performance has proved that recovery is possible. Key traits required in long-term investing are patience, discipline, and resilience. Each of which he has in spades.
In the short term, I think market volatility will continue. The prospect of a global recession looms with increasing certainty as this dreadful pandemic continues to do so much damage. But there is a spark of hope to be seen, in China emerging from lockdowns and returning to work.
Investing in your financial future
While short-term risks remain, for those taking a long-term view, I think there are bargain shares to be had. In previous bear markets, investors buying shares at low prices enjoyed high returns when their patience paid off.
Following a similar strategy today could be a wise move to safeguarding your financial future. If you have savings or the ability to save a small amount each month, I think a Stocks and Shares ISA is a good place for it. You’ll have control over your investments and can buy good quality companies at knock-down prices. When the recovery comes, you’ll be in a great position to embrace it.
When the coronavirus crisis is over and normality resumes, upside volatility could be incredibly exciting. Which is why I think a rapid market recovery could make future millionaires out of brave investors. Particularly those buying low and holding stocks for the long term.
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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.