Don’t waste the stock market crash! I’d buy and hold cheap FTSE 100 shares in an ISA

Taking advantage of low prices across the FTSE 100 (INDEXFTSE:UKX) could boost your ISA returns over the long run, in Peter Stephens’ opinion.

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 has experienced a number of market crashes since its inception in 1984. However, they haven’t happened all that frequently. As such, investors who’ve purchased high-quality stocks when they traded at low prices have generally recorded strong returns in the index’s subsequent recoveries.

While the FTSE 100’s price level could move lower in the short run, now could prove to be one of the most attractive buying opportunities for long-term investors since the index’s inception. Through focusing on strong businesses and holding them in an ISA, you could significantly improve your financial prospects over the coming years.

Bear markets

During the FTSE 100’s 36-year history, it’s experienced only a handful of bear markets. These include the 1987 crash, the bursting of the tech bubble, the financial crisis, and the recent market crash caused by coronavirus.

Within those bear markets, the prospects for the index appeared to be extremely downbeat. In fact, at times during FTSE 100 bear markets, it can be exceptionally difficult to see how the prospects for the economy will ever improve.

However, the common thread that links all of them is the fact the index has always recovered. Its price level may move lower in the short run if the economy’s outlook deteriorates further. But, over the long run, the FTSE 100 is very likely to experience a recovery. After all, it has done in previous bear markets.

Buying opportunities

Buying stocks during a bear market can be tough. It may cause losses over the near term. That, invariably, leads to investors experiencing fear and worry about their holdings.

However, if you can buy financially-sound businesses with long-term recovery potential at attractive prices, it doesn’t matter to a large extent how they perform in the short run. For example, if you’re seeking to build a retirement nest egg through your ISA, you’re likely to have sufficient time for the FTSE 100 to recover. Even from its very worst bear markets.

Therefore, taking advantage of the FTSE 100’s current low price level, as well as its recovery potential, could prove to be a worthwhile move. Investors who bought during previous bear markets are likely to have made gains in the following years. So the performance of the FTSE 100 in the coming years could be relatively impressive.

ISA investing

Investing in FTSE 100 shares can be done at low cost and with great simplicity through a Stocks and Shares ISA. They offer greater flexibility than other financial products, such as a SIPP. That’s because withdrawals can be made without penalty at any time.

With ISAs also being tax-efficient, they may also allow you to experience strong net returns over the coming years. Especially if you’re buying and holding a selection of cheap FTSE 100 shares.

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

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 »

Investing Articles

Are HSBC shares a FTSE bargain? Here’s what the charts say!

There are plenty of dirt-cheap FTSE 100 banking stocks for investors to choose from today. Our writer Royston Wild believes…

Read more »