The world’s super-wealthy are waiting for the next stock market crash before buying more shares, according to a headline I spotted today. Every investors likes buying cheap FTSE 100 shares, so is this a sensible strategy?
I don’t think so. These people may be hugely wealthy, but by holding off until the next phase of the stock market crash, they’re making a basic investment error. They’re trying to time the market. Amd it can’t be done. No matter how wealthy you are, you cannot predict the future like that.
Of course, the world’s mega-rich investors may be right, and we’ll get another stock market crash. These are strange and volatile times, and Covid-19 isn’t simply going to disappear.
I’d buy cheap FTSE 100 shares today
We may get a second or third wave of infections after lockdowns are eased. I assume the world’s super-wealthy are holding out for that possibility. Or maybe they expect a sell-off once this is all over, and we can finally assess the long-term economic damage. So it’s perfectly likely that we could see another FTSE 100 crash.
My point is you cannot predict it, and shouldn’t wait for it. You don’t know when it will come, or how far share prices will fall. Nobody does.
It’s impossible to second-guess stock market movements, no matter how much money you have at your disposal. The variables are simply too great for the human mind to calculate, or any computer for that matter.
Forget the next stock market crash
All sensible long-term investors can do is invest, buy shares when they have the money to spare, then hold onto them for as long as they can. That means a minimum five years and, ideally, 20, 30, 40, or 50 years.
The only way you can time the market is by investing in cheap FTSE 100 shares after the index has crashed. That way you have hindsight on your side. This is why we on The Fool urge people to go hunting for bargain stocks in the aftermath of a meltdown. History tells us the market will recover in time and, therefore, this is a great opportunity to buy cheap shares.
Plenty of people held back from buying shares when the FTSE 100 dipped below 5,000 last month. They were hoping to buy at 4,500, or 4,000. Today, they’re kicking themselves.
Don’t wait for a stock market crash to send the FTSE 100 down to a round number in your head. Despite the stock market rebound, the index is still down 23% from January’s high of 7,674. And that looks like a buy signal to me.
It means you still have a great opportunity to buy cheap FTSE 100 shares today. The stock market crash has already happened. Turn it to your advantage right now.
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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.