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To invest successfully after the coronavirus market crash, I’d take these 3 simple steps

The recent coronavirus market crash may have caused some investors to become increasingly cautious when it comes to managing their portfolios. The pace of decline across numerous stocks may mean that less risky assets appear to be more appealing at the present time.

However, through buying dominant businesses in sectors that have uncertain futures while they offer wide margins of safety, you could generate high returns in the long run. This strategy may boost your financial prospects and enable you to maximise your returns as the world economy recovers.

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Investing in unpopular sectors

Investing in industries that are unpopular among other investors may seem to be a risky move after a market crash. After all, in many cases they face challenging near-term outlooks, with reduced demand for their products and services likely to negatively impact on their financial prospects.

However, buying stocks when their outlooks are challenging can be a means of obtaining attractive valuations. This may enhance your long-term return prospects, since the global economy is very likely to recover from its current difficulties to post positive growth. This could lead to rising stock prices across those industries that are currently unloved by investors.

Furthermore, with investors having priced-in the risks facing many sectors, there could be opportunities to buy high-quality businesses while they offer attractive risk/reward ratios.

Buying dominant businesses

Investing in the strongest businesses within unpopular sectors could be a sound move in a market crash. It may reduce your overall risks, since your capital will be focused on those companies that have the best balance sheets and strongest market positions relative to their peers. They may be less likely to succumb to a period of weaker sales than their industry rivals.

Dominant businesses may also be in a position to capitalise on industry weakness through acquisitions while company valuations are low. This may increase their market share and allow them to generate higher profits in the long run, which could lead to them enjoying a rising stock price that boosts your portfolio’s performance.

A margin of safety in a market crash

Clearly, the future prospects for the world economy are highly uncertain at the present time. The stock market may have rebounded from its recent crash, but risks such as a second wave of coronavirus could persist over the coming months. This may cause investor sentiment to become highly volatile, which could lead to disappointing stock price returns over the near term.

As such, obtaining a wide margin of safety when buying stocks could be a logical move for all investors. It may help to limit your risks, and provide greater scope for capital growth in the long run.

Despite the recent market rebound, a number of companies continue to trade on valuations that are significantly below their historic averages. Therefore, there are numerous opportunities to buy undervalued stocks and hold them over the long run.

A Top Share with Enormous Growth Potential

Savvy investors like you won’t want to miss out on this timely opportunity…

Here’s your chance to discover exactly what has got our Motley Fool UK analyst all fired up about this ‘pure-play’ online business (yes, despite the pandemic!).

Not only does this company enjoy a dominant market-leading position…

But its capital-light, highly scalable business model has previously helped it deliver consistently high sales, astounding near-70% margins, and rising shareholder returns … in fact, in 2019 it returned a whopping £150m+ to shareholders in dividends and buybacks!

And here’s the really exciting part…

While COVID-19 may have thrown the company a curveball, management have acted swiftly to ensure this business is as well placed as it can be to ride out the current period of uncertainty… in fact, our analyst believes it should come roaring back to life, just as soon as normal economic activity resumes.

That’s why we think now could be the perfect time for you to start building your own stake in this exceptional business – especially given the shares look to be trading on a fairly undemanding valuation for the year to March 2021.

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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.