The stock market’s recent crash could offer a fantastic opportunity for long-term investors to snap up a basket of blue-chip shares at discount valuations. Doing so could help you make a million in the market.
The simplest way to profit
The simplest and most effective ways to profit in the stock market is to buy stocks when they’re trading at low levels. However, just buying any business because it looks cheap isn’t usually a sound investment strategy. This is especially true in today’s market. It could even hurt your chances of being able to make a million.
The world economy is confronting enormous difficulties as a result of the coronavirus crisis. Most companies are facing uncertain futures and challenging trading conditions. Unfortunately, it’s likely this situation will continue in the short run. Nevertheless, now could be an excellent opportunity to buy undervalued stocks for the long term.
Purchasing companies which have wide economic moats could be a sound move and help you make a million.
Wide economic moats
Put simply, an economic moat is a competitive advantage. This suggests the company in question has brighter prospects than its rivals. Moats can come in many forms.
For example, it could be lower costs, a unique product, or strong customer loyalty. Finding companies with these qualities could help you make a million.
If a business has any of these positives, it may be better able to cope with challenging trading conditions than sector peers. What’s more, these companies might even be able to capitalise on the severe trading conditions and come out stronger on the other side.
During periods of market uncertainty, it’s very easy to become concerned about the outlook for equities. However, these periods have always given way to successful recoveries. Some companies haven’t been able to survive, but those that do sometimes go one to print record-high stock prices.
Therefore, if you’re able to look past the short-term uncertainty, and instead focus on the recovery potential of the stock market, you could greatly increase your chances of being able to make a million.
Investing to make a million
Over the past 120 years, UK stocks have returned around 7.5% before inflation. At this rate of return, it wouldn’t take much to make a million in the market.
My figures show an investment of just £350 a month at this rate of return would be enough to hit that target.
So, if that’s your investment ambition, now could be the time to take advantage of the recent stock market declines and start investing.
The short-term outlook for the market is uncertain. Still, its historical performance suggests buying undervalued stocks and holding them for the long run will improve your chances of being able to make a million with shares.
That’s why now could be the time to make the most of the current stock market crash, and use other investors’ concerns to your advantage.
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Rupert Hargreaves 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.