The Motley Fool

Don’t waste the stock market crash! I’d buy bargain stocks to get rich and retire early

Buying bargain stocks could prove to be a risky strategy over the coming months. Many industries face hugely challenging operating conditions across the world economy that may persist over the short run. As such, the stock market’s performance could be somewhat disappointing after its recent market crash.

However, investors with long-term time horizons could benefit from the wide margins of safety currently on offer. There may be favourable risk/reward opportunities across many sectors that lead to impressive long-term returns. They could boost your financial prospects and help you to retire early.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

A wide margin of safety

Buying cheap stocks may allow you to access more attractive risk/reward opportunities. In some cases, low valuations are merited at the present time. For example, companies trading in sectors such as retail and travel & leisure could experience difficult trading conditions that negatively impact their financial performances. However, in other cases, weak investor sentiment towards the wider stock market means that you can buy high-quality businesses at a large discount to their intrinsic values.

A strategy of buying undervalued stocks has historically been highly successful. The stock market has never experienced perpetual bear markets. Indeed, it’s produced high single-digit annual returns despite a number of downturns, crashes and bear markets. Through buying stocks when they offer wide margins of safety, investors can benefit from the cyclicality of the stock market, as well as its recovery potential.

Relative appeal of bargain stocks

It may be tempting to ignore bargain stocks at the present time due to the uncertain economic outlook. Investors may even decide to focus their capital on lower-risk assets, such as bonds and cash. They may outperform the stock market should it experience a further crash in the coming months. Challenges such as a weak economic outlook or a second wave of coronavirus remain real threats.

However, over the long run, a portfolio of stocks is very likely to beat the returns of cash and bonds. That’s especially the case since the prospects for a hawkish monetary policy, where interest rate rises are commonplace, seem to be low.

Policymakers may look to provide support to the wider economy through lower interest rates. This could mean the performance of bargain stocks could be significantly more attractive than the returns available from other popular assets, such as cash and bonds.

A long time horizon

Therefore, investors with a long time horizon could improve their retirement prospects through buying bargain stocks today. Certainly, they may not produce paper gains over the coming months due to the uncertainties facing the world economy. However, over the long run, the favourable risk/reward opportunities available due to weak investor sentiment and the growth potential of the world economy mean they may help to bring your retirement date a step closer.

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.

Click here to claim your copy of this special report now — and we’ll tell you the name of this Top Growth Share… free of charge!

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.