The stock market crash is a great opportunity to pick up cheap FTSE 100 shares at bargain prices. This can turbo-charge your efforts to build a million-pound portfolio. If you do that, you can get rich and retire early.
However, a few simple errors at this crucial stage can cost you dear. Avoiding unforced errors is vital, as the world’s greatest investor Warren Buffett pointed out: “You only have to do a very few things right in your life so long as you don’t do too many things wrong.”
Now is an exciting time to buy shares, with the FTSE 100 still more than 1,000 points below its January highs. The stock market crash has thrown up plenty of cheap FTSE 100 stocks, so I suggest you go looking for them. In your bid to make a million before you retire, beware these three errors.
1. Looking to make a quick profit
The stock market is not a get-rich-quick mechanism. It can make you rich, but slowly, steadily, over many years. This is a core part of the Motley Fool UK philosophy. Our chief investment adviser Mark Rogers says we do not aim to make fast profits by forecasting short-term price or market movements: “We have no clue in which direction the market or individual stocks will go in the short run, and we don’t think short-term trading is a sensible or profitable strategy.”
While we recommend taking advantage of a short-term stock market crash, your eyes should always be on the long term.
2. Trading rather than investing
Mark Rogers regularly reminds Fool writers that when you buy a share, you become a part-owner of that business, sharing in its future profits and growth. Investors should therefore “buy with the mentality of a business owner, rather than a stock trader”.
Again, this means investing for the long term. Buying and selling shares to make a quick profit backfires, as you cannot repeatedly time the market with any accuracy. You will also rack up excess trading charges which will deplete your wealth. This lesson is just as important in a stock market crash, as at any other time.
3. Run scared of a stock market crash
Too many investors hold back from buying shares in the stock market crash. That is understandable, these are disorientating times. However, you cannot afford to miss this opportunity to pick up cheap FTSE 100 shares.
We are likely to see further stock market volatility in the months ahead as the world struggles out of lockdown. Do not let that put you off. Provided you are buying FTSE 100 shares with the aim of staying invested in the business for many years, you can look beyond today’s short-term volatility and build meaningful wealth measured over decades.
It really is possible for ordinary investors to make a million on the stock market. Just think long term and cut out those errors.
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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.