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

If you spend your life fearing the next stock market crash you’ll have missed a great opportunity to buy FTSE 100 shares.

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.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

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.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

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.

More on Investing Articles

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »