Since its inception in 1984, the FTSE 100 has experienced a variety of market crashes. Notable bear markets include the 1987 crash, the tech bubble in the early 2000s, and the global financial crisis in 2008/09.
As well as its crashes, the index has also experienced strong rebounds following all of its bear markets. Sometimes it has taken months to recover, at other times it has taken years. However, the index has a strong track record of recovering from its most challenging periods.
As such, now could be the right time to buy FTSE 100 shares while they offer good value for money ahead of a likely rebound for the index.
Many investors adopt a strategy where they seek to buy high-quality shares when they trade at low prices. This enables them to maximise their returns over the long run, since they are purchasing companies when they trade at a wide discount to their intrinsic values.
The problem for investors adopting that strategy, however, is that most of the time shares do not trade at exceptionally low levels. In fact, they usually only offer wide margins of safety when there is a good reason for them to do so.
Often, a highly challenging economic outlook is required for companies to offer excellent value for money. At such times, it can be difficult to buy shares, since there is a very real chance that their prices will decline before them improve. This can mean that many investors miss out on opportunities to buy high-quality shares when they trade at exceptionally low levels.
Buying cheap stocks
Of course, it is always easy with hindsight to state that a buying opportunity has occurred in the past. It is much more difficult to identify buying opportunities in the present.
However, the track record of the FTSE 100 should provide investors with comfort in the index’s long-term prospects. As mentioned, it has always rebounded from its lowest points to post new record highs in the following years.
As such, even if your holdings move lower in price after you have bought them, there is still a very high chance that a portfolio of FTSE 100 shares will be worth much more in five or 10 years’ time than it is today. And, since losses are only paper losses until they are realised, long-term investors may not be all that concerned about share prices trading lower in the short run.
A rare opportunity
Therefore, now could be the right time to buy bargain FTSE 100 shares. Certainly, they could move lower in the near term depending on news regarding coronavirus and its economic impact. But some FTSE 100 shares are trading on valuations that are only available during the most challenging bear markets and recessions.
As such, now could be an opportune moment to buy them ahead of a long-term recovery. This prospect may not seem all that likely today, but history shows that the FTSE 100 is very likely to produce new record highs in the coming years.
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.