If you have a large sum to invest, the stock market crash is a massive opportunity. Whether you have £10k or £50k or £100k, now’s a great time to buy cheap FTSE 100 stocks.
A stock market crash like this one makes many investors nervous. And that makes it a great time to pick up FTSE 100 bargains. While some companies are in deep trouble, there are plenty of good firms that have been dumped alongside the bad.
Many will recover when the coronavirus lockdown ends. That means investors who buy cheap FTSE 100 stocks today will reap the rewards further down the line.
Stock market crash bargains
Share prices have fallen by up to a quarter during the crash. That means your £10k, £50k, £100k will buy around 25% more stock than before. It’s the same principle as hitting the sales. Your favourite stuff is suddenly cheaper, so why wouldn’t you take advantage?
This is even more exciting than a normal sale. Most purchases start losing their value the moment you walk out of the store. But when you buy cheap FTSE 100 shares in a stock market crash, you’re buying an asset that should rise in value, over time.
The longer you hold your investments, the more valuable they should become. You can really benefit from buying them in the middle of today’s stock market crash. In return, you’ll face short-term volatility, but you should end up comfortably ahead overall.
If I had £100k, I’d start by buying a spread of cheap FTSE 100 stocks through a low-cost index tracker. I might combine that with a FTSE All-Share tracker, in order to get exposure to smaller, faster-growing UK companies as well.
Then I’d go shopping for individual blue-chip stocks to turbo-charge my returns. I would start with companies most likely to stand by their dividends, as others drop theirs due to Covid-19-related pressure.
I’d buy these cheap FTSE 100 stocks
Oil giants BP and Royal Dutch Shell appear to be standing by their payouts, despite the combined effect of the stock market crash and the oil price plunge. So are mining giants Rio Tinto and BHP Group, and pharmaceutical firms GlaxoSmithKline and AstraZeneca.
Tobacco companies British American Tobacco and Imperial Brands are also standing firm, as are Diageo, National Grid, Tesco and Unilever.
I would start with these. Then, if I was feeling brave, I’d take a punt on a few dirt-cheap FTSE 100 stocks that could really fly if we get a V-shaped recovery.
I would drip feed my £100k into the market over several weeks or months, rather than throw it in all at once. Don’t leave it too long, though. At some this point, today’s stock market crash buying opportunity will be over.
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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline and Unilever. The Motley Fool UK has recommended AstraZeneca, Diageo, Imperial Brands, and Tesco. 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.