The Motley Fool

3 simple steps to use this market crash to get rich and retire early

The recent stock market crash may have caused many investors to become cautious about buying equities. After all, the outlook for the world economy is very uncertain, and news regarding coronavirus could change quickly.

However, through buying high-quality businesses while they offer a margin of safety you could improve your long-term financial outlook. This strategy has been successful in the past, and could help you to retire early.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

High-quality stocks

Due to the challenging outlook for the world economy, perhaps the most important criteria for purchasing any stock is its ability to survive a likely recession and the potential for a further market crash. Therefore, any business you seek to purchase should have a solid balance sheet, in terms of modest debt levels and substantial amounts of cash, as well as some defensive characteristics.

Such companies may be in a strong position to not only survive an economic downturn, but also to strengthen their market position. For example, they may be able to win market share from weaker competitors. Or they could capitalise on low valuations to buy competitors at bargain prices. Either way, they could generate higher levels of profit over the long run, and produce higher stock prices as a result.

Margin of safety after a market crash

Investing with a margin of safety is a sound strategy that helps to reduce risk and improve your return prospects. Essentially, it means buying an asset for less than it is worth. In doing so, you obtain a margin of safety that could be especially useful in the current uncertain economic climate, when the stock market’s recent rebound may give way to a market crash.

Assessing a company’s value at the present time is, of course, highly challenging. Earnings and asset prices could change, which could make some valuation metrics unreliable. However, by focusing on a range of measures, such as yields, price-to-book (P/B) and price-to-earnings (P/E) ratios and comparing them to industry peers as well as historic values, it may be possible to gauge whether a stock offers good value for money. Buying it at a discount to its intrinsic value could lead to a more favourable risk/reward opportunity.

Long-term focus

The near-term prospects for the stock market are likely to be very uncertain. The risk of further coronavirus cases in the coming months may cause investor sentiment to rapidly shift from positive to negative, which could cause a further market crash.

Therefore, investing for the long term could be a shrewd move. It will enable you to look beyond the short-term volatility that is likely to be present across the stock market. And you could use it to your advantage in terms of buying high-quality businesses at low prices.

The track record of the stock market shows that it has always recovered from is lowest points during a variety of bear markets. Yes, that prospect may seem unlikely right now. But by adopting a long-term focus, you could stand to benefit from an equity market recovery that enables you to retire early. 

A Top Share with Enormous Growth Potential

Savvy investors like you won’t want to miss out on this timely opportunity…

Here’s your chance to discover exactly what has got our Motley Fool UK analyst all fired up about this ‘pure-play’ online business (yes, despite the pandemic!).

Not only does this company enjoy a dominant market-leading position…

But its capital-light, highly scalable business model has previously helped it deliver consistently high sales, astounding near-70% margins, and rising shareholder returns … in fact, in 2019 it returned a whopping £150m+ to shareholders in dividends and buybacks!

And here’s the really exciting part…

While COVID-19 may have thrown the company a curveball, management have acted swiftly to ensure this business is as well placed as it can be to ride out the current period of uncertainty… in fact, our analyst believes it should come roaring back to life, just as soon as normal economic activity resumes.

That’s why we think now could be the perfect time for you to start building your own stake in this exceptional business – especially given the shares look to be trading on a fairly undemanding valuation for the year to March 2021.

Click here to claim your copy of this special report now — and we’ll tell you the name of this Top Growth Share… free of charge!

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.