Every stock market crash presents an opportunity to buy good quality shares on the cheap. At the time of writing, the FTSE 100 index has shed around 24% of its value since the start of 2020.
As a result, many UK stocks are trading on cheap valuations relative to pre-crash levels, meaning there could be some bargains out there. With that in mind, here’s how I’d use the stock market crash to boost my chances of making a million.
Buy cheap shares
If you’re going to succeed in making a million in the stock market, it certainly helps to buy stocks while they’re going cheap.
Towards the end of last week, the FTSE 100 dipped back below 6,000, meaning investors have another opportunity to cash in on bargain shares before any future market rebound.
Eventually, the stock market will recover, as it always has done, and buying shares while they’re cheap means that when this happens, you’ll profit from a rise in prices across the board and kickstart the process of compounding returns.
Be ready for another fall
A word of caution though, share prices may plunge further in the short term as volatility looks set to plague the stock market. This is even more likely considering the current tension between the US and China, which provoked the sell-off at the end of last week.
That said, it pays to be optimistic. So, I’d see a further tumble in the stock market as another opportunity to buy bargain shares that will boost my chances of making a million.
Nevertheless, those eager to make such a sum of money needn’t worry about market volatility in the short term. In reality, it’s never going to be a smooth, straight line upwards.
Hold for the long term
That’s why it’s so important to hold your investments for the long term, especially if you’re intent on making a million.
It’s worth remembering that for investing genius Warren Buffett, it took decades for his wealth to amount to what it is today. As The Motley Fool’s twitter team illustrate:
96% of Warren Buffett’s net worth was accumulated after his 65th birthday. That’s how compounding works.
— The Motley Fool (@themotleyfool) October 2, 2019
Following in Buffett’s footsteps, the key to making a million is to unleash the miracle of compound returns. To give you an example, assuming a growth rate of 9% and an initial lump sum investment of £1,000, investing £250 a month will make you a millionaire after 38 years. In my opinion, the power of interest and time is unmatched when it comes to increasing wealth over the long term.
Ultimately, investing in cheap UK shares that exhibit strong earnings potential, continued growth prospects, and innovative business strategies will kickstart your journey to financial freedom.
That’s why I’d look upon this stock market crash as an opportunity to boost my chances of making a million!
Matthew Dumigan 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.