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By running scared of ‘stock market crash 2’ you’ll miss the FTSE 100 recovery

During the stock market crash in March, I wrote articles urging investors not to sell shares. Instead, I said they should take the opportunity to buy them at reduced prices.

At Motley Fool, we believe a stock market crash is a great opportunity to buy cheap shares, to hold for the long-term. Recent weeks have been a great time to pick up top FTSE 100 stocks at bargain prices. Then sit back and wait for them to recover.

There were times when I wondered if I was doing the right thing. When the FTSE 100 fell below 5,000 and the world went into lockdown, I thought shares might have a lot further to fall.

I’d buy cheap FTSE 100 shares today

Luckily, I’ve been writing about investing for 25 years, which means I’ve been through loads of stock market crashes. In that time, I’ve learned that, in the middle of a meltdown, you need to keep a cool head, and look to the future.

A stock market crash isn’t the end of the world, even though it might seem like it at the time. History shows share prices recover, if you give them time. Investors who screw up their courage and buy when share prices are plunging generally reap the rewards.

I had to remind myself of this during the lows in March. Then I did what I was telling other people to do, and invested in the FTSE 100. The index rebounded, and way faster than I could have imagined.

At time of writing, the FTSE 100 stands at 6,475. That means it’s up almost 30% since the stock market crash bottomed out.

Don’t fear stock market crash 2

This is a weird recovery. We face the sharpest recession in modern times. Millions could lose their jobs. The real economy is hurting, and so are real people. There’s a reason why this has been called the most hated stock market rally in history. People don’t trust it.

The share price recovery has been driven by fiscal and monetary stimulus, unleashed on an unprecedented scale. Investors are betting this will ultimately flow into asset prices, driving them to new highs. The process has already started.

Let’s hope the money also flows into the real economy too, to offset the pain once government furlough schemes end. That would benefit stock markets too, by making the recovery sustainable.

Share prices are likely to remain volatile. The stock market could crash again. Yet investors who hold back could end up kicking themselves as the recovery continues.

Nobody knows where the market will go next. They never do. All you can do is buy shares when you’ve the money, and hold them for the years and, ideally, decades. In the longer run, shares beat every rival asset class. The price you pay for this outperformance is the odd stock market crash.

Don’t fear falling shares. Buy them.

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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.