Billionaire, successful investors have some rules for how they grow and manage their wealth. The next stock market crash, I believe, can be a great opportunity to get rich if you follow these rules.
The next market crash
There are plenty of reasons for the next stock market crash. In fact, it might have already started. Yesterday, the US stock indexes closed in the red. That’s because of rising US-China tensions and the surging coronavirus cases in America.
The US rejected Chinese claims in the South China Sea. President Trump’s administration also confirmed the plan to put some regulatory pressure on US-listed Chinese companies. Meanwhile, in California the number of Covid-19 infections surged. Local authorities had to roll back some re-opening plans.
If I understand correctly, this is just the beginning of the bear market. But don’t worry. The next stock market crash might be your chance to get rich. So, why not use these successful investors’ tips to do so?
Billionaires’ investing tips
Warren Buffett, one of the world’s most successful investors, is famous for his common sense. In his shareholder letters he shares some of his investment principles.
“It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” — says Buffett. First, you have to understand if the firm you’d like to buy has a competitive advantage over its peers. Then, you have to understand if the company has a competent management team. And of course you have to understand if the industry overall has growth potential. At the same time, the Sage of Omaha attempts “to be fearful when others are greedy and greedy when others are fearful“. I interpret this as advice to buy really good companies when every single asset becomes much cheaper. This will be especially relevant during the next stock market crash.
There is another billionaire who is well-known in the investing world, though not much featured in the press. Prince Alwaleed Bin Talal is an investment guru from Saudi Arabia and founder of the Kingdom Holding Company. He has had many reasons to panic, indeed. Before the 2008–09 crisis he held a 14.9% stake in Citigroup. He bought the bank’s shares at a price over and above their post-recession average. Moreover, the Prince’s real estate in India lost a significant part of its value in 2009.
But he still managed to keep his cool. “We’re getting hurt, but I’m a long-term investor.” — said Prince Alwaleed Bin Talal. This is a wise approach, in my view. If you buy a large enough company with a good credit rating, you won’t have to sell it during the downturn in order to avoid losing your entire capital invested. What is more, if you buy a dividend payer with a good track record, you will also keep getting dividends.
Here’s what I’d do
In order to get rich during the stock market crash, I’d choose my positions extremely carefully, buy when everything gets much cheaper and invest for the long term.
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Anna Sokolidou 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.