The FTSE 100 crash has broken many records, shocking investors at the speed of its collapse. The subsequent recovery has been welcome, but share prices remain much lower than at the start of the year. In the weeks ahead, the FTSE 100 could fall again, especially if we struggle to lift the coronavirus lockdown.
Don’t let that deter you from investing. Right now, many top companies are trading at low valuations, and could produce strong long-term returns once the crisis recedes. I reckon now could be a good time to buy bargain FTSE 100 stocks at reduced prices, and boost your chances of retiring early. Provided you plan to hold them long-term.
Stock market crash is your chance
In the short term, nobody can say where the FTSE 100 will go next. That’s always the case, but the outlook is particularly cloudy today. Thanks to Covid-19, we’re in an unprecedented situation.
If confidence returns quickly and the nation rushes out and starts spending again, to make up for lost time, the FTSE 100 could recover rapidly. However, if we get a second wave of the pandemic, and developing a vaccine proves slow going, the volatility could continue.
This shouldn’t put you off buying bargain FTSE 100 shares today. There are many bargains to be had right now. What it should do is make you focus on the long term. History shows that buying stocks at times like these, before the market recovery, is a profitable long-term strategy.
Get rich and retire early
You’re unlikely to time your purchase so perfectly that you buy at the very bottom of the market, but that doesn’t matter. Investing in a selection of stocks when they’re relatively cheap, should pay off over the years.
It always has before, and should do again. We don’t know how long the recovery will take, but the FTSE 100 should rise from these low levels over time. Central bankers and governments have pumped money into the global economy, and this will find its way into stock valuations. Shares will get more expensive, so today’s buying opportunity will be gone.
It seems unlikely governments will opt for austerity this time round, as many did after the financial crisis. A surge in stimulus is more likely. This could help refloat the economy and drive company profitability.
FTSE 100 looks good value
I would focus on buying strong companies with solid balance sheets, loyal customers, regular revenues, and strong net cash positions. Or at least minimal debt. This will put them in a strong position to outperform as weaker rivals struggle. Many could boost their market share by acquiring rivals at reduced prices.
Start by looking for quality FTSE 100 companies trading at attractive valuations. Now could prove to be a great time to buy them, and boost your chances of retiring early.
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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.