The Motley Fool

3 mistakes I’d avoid in this FTSE 100 stock market crash to get rich and retire early

Image source: Getty Images.

The FTSE 100’s recent market crash is likely to cause many investors to seek relative safety in less risky assets. However, this may lead to them missing out on the index’s potential recovery.

Likewise, adopting a short-term focus may be detrimental to your portfolio’s returns. Speculative companies could seem appealing, but it may be a better idea to focus on financially sound businesses.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

Avoid mistakes such as short-termism, flocking to less risky assets and buying speculative stocks. If you do, you could improve your financial prospects to boost your chances of retiring early.

Short-term focus

A common mistake made by a large number of investors during a bear market is focusing on the short-term prospects for the FTSE 100. The index is likely to experience a huge amount of volatility over the coming months, as the economic impact of coronavirus gradually becomes clear. There are likely to be periods when investors are bullish about the world economy’s recovery prospects. But on some days, they could become very bearish.

As such, adopting a long-term focus for your portfolio could be a shrewd move. It may enable you to cut through the market noise, and not become too concerned about paper losses over the coming months. Certainly, focusing on the long term may be difficult at times. But the track record of the stock market shows that investors who can look five or 10 years ahead during a bear market can capitalise on undervalued stocks to generate high returns.

Less risky assets

The relative safety of assets such as cash and bonds may be highly appealing to many investors at the present time. After all, they are far less likely to experience losses when holding cash savings or buying investment-grade bonds.

However, the returns on cash and bonds are extremely unappealing at the present time. Low interest rates look set to continue over the coming years, as the Bank of England aims to support the economic recovery through a loose monetary policy. Therefore, there is a real risk that your returns on cash and bonds will lag inflation. This could cause your spending power to decline.

A better idea could be to buy stocks now while they trade on low valuations. Doing so may boost your long-term financial prospects, and increase your chances of retiring early.

Speculative stocks

Of course, it makes sense to buy companies with strong balance sheets and solid cash flow given the uncertain economic outlook facing the UK. While it may be tempting to buy cyclical companies that are dirt cheap at the present time, ensuring that your holdings survive the next 6-12 months could be the most important aspect to consider.

Through buying high-quality businesses at fair prices, you can increase your risk/reward ratio. In the long run this may enable you to retire early, and enjoy a growing passive income in older age.

“This Stock Could Be Like Buying Amazon in 1997”

I'm sure you'll agree that's quite the statement from Motley Fool Co-Founder Tom Gardner.

But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.

What's more, we firmly believe there's still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.

And right now, we're giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool.

Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge!

Peter Stephens 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.

Our 6 'Best Buys Now' Shares

The renowned analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply enter your email address below to discover how you can take advantage of this.

I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement.