A FTSE 100 crash can happen in a flash. But a stock market rebound can be just as dramatic, as we’ve just seen. The FTSE 100 is now up around 25% from its lows on 23 March, something few investors imagined during the first wave of the Covid-19 panic.
There’s nothing unusual in this. History shows the very worst days in the market are often swiftly followed by some of the strongest rallies. A stock market rebound can blow your socks off.
The FTSE 100 crash has left it down 25%, as markets try to digest this weird new world we now find ourselves living in. A full-blown recovery will take time. And we can expect to see plenty more volatility along the way.
The FTSE 100 crash can quickly reverse
This doesn’t mean you should avoid the market. Quite the reverse. If you hang about waiting for the next stock market rebound before you invest, you’ll almost certainly miss it. And that can cost you dear in the longer run.
Fund manager Fidelity found that if you were fully invested in the FTSE 100 over the 26-year period from 1992, you’d have a total return of 559%, with dividends reinvested. However, if you had missed the best five days in the market, your total return would fall to just 343%. Missing the best 30 days would leave you with a meagre 48%.
You really don’t want to miss the best days in the market, because it can dramatically reduce your wealth, and ability to enjoy a comfortable retirement. We saw several of these best days over the past fortnight, as shares raced to recoup their losses.
The problem is that nobody has any idea when those days will be. They come out of the blue and, if you sit on the sidelines worrying about the next FTSE 100 crash, you’ll almost certainly miss them.
Get set for the stock market rebound
There’s one simple and surefire way to be present for those action-packed surges. Put money in the stock market when you have any to spare, and leave it there. That way you’ll benefit, whenever they happen.
Naturally, you’ll also take a beating on those days when share prices fall. And we may experience another FTSE 100 crash in the weeks ahead. The important thing to remember is that the long-term trajectory of the stock market is upwards. Overall, the good days will outnumber the bad, especially when the stock market rebound kicks in for real.
Nobody can consistently time the stock market. What you can do is buy shares after a FTSE 100 crash, to take advantage of bargain prices.
Then remain invested through the ups and downs to come. That’s the best way to get rich and retire early. Shares will help you do that, especially when the market rebounds.
Harvey Jones 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.