Stock market crash: This could be a once-in-a-lifetime chance to buy cheap shares

Why I’d cast aside fears of a second dip in the markets and target shares backed by good businesses, right now to avoid ‘fence-sitters’ remorse’.

 

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.

The recent rally from the stock market crash of 2020 has left many investors sitting on the fence. And I can understand the sentiments leading investors to wait things out.

The pandemic is unprecedented in modern times. The crashing of economies around the world is something new. And the threat of a second upsurge in the virus hangs heavy in the air.                 

Just like many other stock market crashes

But in some ways, this has been just like many other stock market crashes. The reasons are different – as they always are – but the outcome has been the same for stocks. And the uncertainties surrounding the outlook chime with the fears following prior crashes. Markets always seem to climb a wall of worry on the way back up.

I only know one cure for overcoming the fear of investing, and that’s to invest. Indeed, some of the best investments we can make are when the outlook is grey and uncertain. When markets plunge, there’s an opportunity to buy good-quality stocks when they are selling more cheaply. And if you invest with a long time horizon in mind, buying cheaply can lead to outsized gains in the years ahead.

So, I’d cast aside fears of a second dip in the markets and target shares backed by good businesses, right now. Such action could be a good way of avoiding what I’d describe as ‘fence-sitters’ remorse’. And it looks like former hedge fund manager Stanley Druckenmiller could be suffering something similar right now.

In 1992, along with George Soros, he shorted the pound and made billions. But this week, he told CNBC his return of 3% from the March lows has “humbled” him. Over the same period, America’s Dow and S&P 500 both shot up by more than 43%.

It’s almost always a good time to invest in shares

It seems that Druckenmiller formed an opinion during the crash and is on record as saying, “The risk-reward for equity is maybe as bad as I’ve seen it in my career”. But he acknowledged later that he underestimated the lengths the Fed would go to help support the financial markets. Indeed, I reckon governments everywhere have been throwing everything they can at the crisis, and it’s pushed share prices higher.

Yet when we examine Druckenmiller’s reasons for avoiding stocks – just as they were at their cheapest – I reckon he was fearful or cautious, just like many of us. Even super-successful investors get things ‘wrong’ from time to time.

But if you are investing for the long term – perhaps to build a pot of money for your retirement – it’s almost always a good time to invest in shares. I reckon one of the keys to building sizeable gains from shares and share-backed investments is to invest regularly, perhaps every month. Another is to compound your gains by ploughing dividends and gains back into your investments. A third is to invest for a long time. And a fourth is not to run scared when the markets dip.

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.

Kevin Godbold has no position in any share 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

Black father and two young daughters dancing at home
Investing Articles

1 FTSE 250 stock I own, and 1 I’d love to buy

Our writer explains why she’s eyeing up this FTSE 250 growth phenomenon, and may buy more shares in this property…

Read more »

View of Tower Bridge in Autumn
Investing Articles

The FTSE 100 is closing in on 8,000 points! Here’s what I’m buying before it’s too late!

As the FTSE 100 keeps gaining momentum, this Fool is on the lookout for bargains. Here's one stock he'd willingly…

Read more »

Investing Articles

3 ideas to help investors aim for a million-pound Stocks & Shares ISA

The UK has a growing number of Stocks and Shares ISA millionaires, and this plan may be one of the…

Read more »

Illustration of flames over a black background
Investing Articles

2 red-hot UK growth stocks to consider buying in April

These two growth stocks are performing well, but can they continue to deliver for investors through 2024 and beyond?

Read more »

Charticle

Is JD Sports Fashion one of the FTSE 100’s best value stocks? Here’s what the charts say!

The JD Sports Fashion share price remains a wild ride during the first quarter. Could it be one of the…

Read more »

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 »