Every stock market crash offers cheap shares. I’d buy FTSE 100 stocks now to retire early

The FTSE 100 (INDEXFTSE:UKX) appears to offer good value for money for long-term investors, in my view.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The FTSE 100’s recent market crash isn’t the first time the index has experienced severe declines in its price level. Since its inception in 1984, the index has fallen heavily on a number of occasions. Following each of them, it has produced a successful recovery. Every time, share buyers have been handsomely rewarded.

As such, investors who’ve a long time horizon may benefit from buying FTSE 100 shares now while they’re trading on low valuations. Okay, this strategy could produce paper losses in the short run. But it may also improve your prospects of retiring early.

Past performance

As mentioned, the FTSE 100’s past performance includes a number of bear markets. Notable downturns for the index occurred in 1987, the early 2000s, and the global financial crisis. During each of those periods, the index declined to exceptionally low levels. It felt at the time as through a recovery was very unlikely.

However, over time, the index did recover from its bear-market lows. On occasions, it experienced brief rallies during its downturns. But they proved to be false dawns for investors. However, over the long run, the index has generally recorded growth in its price level. And that’s very likely to be repeated in the coming years.

Long time horizon

Of course, investing during the FTSE 100’s downturns has been a risky short-term strategy. On a number of occasions during its previous downturns the index has experienced a large amount of volatility that has caused paper losses for investors.

At the present time, the index’s near-term prospects are highly linked to the re-opening of the global economy following the end of coronavirus. Since nobody knows when this will occur and, of course, whether there’ll be a second lockdown later this year due to a potential further outbreak, investors may experience disappointing returns in the short run.

However, if you’ve a long time horizon then the short-term performance of your portfolio is unlikely to be your primary concern. Investing in cheap stocks that have strong balance sheets may mean that the uncertain near-term outlook is a worthwhile risk in return for the long-term recovery prospects of the FTSE 100.

Starting today

While the risks present across the economy may mean that now doesn’t seem to be the right time to start buying FTSE 100 shares, a recovery is only obvious after it has occurred. In other words, buying stocks after the index has exited its bear market may mean that you miss out on a sizeable proportion of their gains.

Therefore, adopting a long-term investment view and buying a selection of FTSE 100 shares now could be a sound move. It may improve your financial prospects and help to bring your retirement date a step or two closer.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

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.

More on Investing Articles

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »