The Motley Fool

Market crash: this could be a once-in-a-lifetime opportunity to buy bargain stocks

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.

Image source: Getty Images.

The recent stock market crash has caused significant losses for many investors. A wide range of stocks have not yet recovered from one of the most severe and fast-paced stock market declines in living memory.

While further challenges could be ahead for investors, the recent market crash could present a superb buying opportunity. Although short-term risks remain, the recovery potential of the stock market suggests that purchasing a diverse selection of companies today could lead to strong capital returns in the long run.

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...

A rare occurrence

As mentioned, the recent market crash has been one of the fastest and most significant declines in recent decades. Although there have been other bear markets such as the global financial crisis, they have generally occurred relatively infrequently. In fact, bear markets are rare occurrences and often do not last for a prolonged period of time before a recovery comes into force.

Therefore, during an investor’s lifetime there are unlikely to be a large number of opportunities to buy stocks when they trade at bargain levels. Certainly, there are always opportunities to buy attractive stocks in all market conditions. But the valuations that are currently on offer across many industries have not been seen since the financial crisis over a decade ago – if at all — and are unlikely to be present for many more years in future.

Buying in a market crash

Although the prospect of buying undervalued stocks during a market crash may not feel natural to many investors, it can be a highly profitable exercise. After all, the stock market has always recovered from its declines. This time around is unlikely to be any different over the long run.

As such, it could be a good idea to adopt a long-term view of your holdings and to try to ignore market noise. Many investors have negative views of the stock market, while others are seeking to second-guess the movement of stock prices in the short run. By ignoring their views and instead buying high-quality businesses at low prices for the long run, you could capitalise on bargain valuations at present.

This strategy may require a large amount of self-discipline, as well as an acceptance that paper losses could be ahead in the short run. But it has been a successful strategy for many investors in periods when a market crash has previously occurred.

Diversification

As well as buying stocks in a market crash, it is important to manage risk through diversification. It is currently extremely difficult to know which sectors will return to strong growth in the coming years, since the full impact of coronavirus on consumer behaviour is a known unknown.

Therefore, reducing your exposure to specific companies and sectors could cut your portfolio risk. It may also enable you to generate higher returns in the coming years as the stock market gradually recovers.

“This Stock Could Be Like Buying Amazon in 1997”

I'm sure you'll agree that's quite the statement from Motley Fool Co-Founder Tom Gardner.

But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.

What's more, we firmly believe there's still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.

And right now, we're giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool.

Click here to claim your copy now — and we’ll tell you the name of this Top US 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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.