Stock market crash: I’d listen to Warren Buffett and buy cheap UK shares to make a million

Following Warren Buffett’s lead in buying cheap stocks after a market crash could improve your chances of making a million, in my view.

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 stock market crash may have dissuaded some investors from buying UK shares in their quest to make a million. Their volatile performance and uncertain outlook may mean investors are holding cash or other lower-risk assets.

However, buying undervalued shares after a market decline could prove to be a sound move. It’s a strategy that’s been used successfully in the past by star investors such as Warren Buffett. Through purchasing high-quality businesses when they trade at low prices, you can use the stock market cycle to your advantage.

Booms and busts

The recent market crash clearly caught most investors by surprise. However, a decline in stock prices is, in itself, relatively common. In fact, indexes such as the FTSE 100 and FTSE 250 have never produced uninterrupted growth. Instead, they’ve experienced periods of boom and bust that provide investors with the opportunity to buy stocks at low prices. And sell them later on at higher prices.

Clearly, buying undervalued UK shares when the economic outlook is challenging is a difficult task. Investors may experience paper losses in the short run, since it’s almost impossible to accurately determine when the market will produce its next recovery.

However, with it having a strong track record of doing so, you can increase your chances of generating high returns from the stock market simply by adopting a long-term stance. This may help you to look beyond any short-term disappointment, and to focus on the potential for share price turnarounds.

Buying shares after a market crash

Following Buffett in buying shares after a market crash may help to increase your chances of making a million. However, this task could be further boosted by adopting his strategy when it comes to which stocks you decide to purchase.

For example, Buffett has always focused his capital on a relatively narrow range of industries. In doing so, he ensures that he fully understands what makes them tick. This may improve his capacity to identify the strongest companies within a specific sector, which could enhance his overall returns.

Furthermore, Buffett focuses on stocks that have a competitive advantage over their peers. For example, they may have a unique product or a lower cost base than their rivals. This may increase their chances of surviving a tough economic period after a market crash. And that could also boost their chances of increasing market share to generate improving profitability.

An uncertain future

Clearly, there’s a chance of a second market crash should investor sentiment weaken in the coming months. Aim to purchase high-quality UK shares in sectors that you understand for the long run while they offer good value for money. That way you could increase your chances of making a million.

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.

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 woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

The market is wrong about this FTSE 250 stock. I’m buying it in April

Stephen Wright thinks investors should look past a 49% decline in earnings per share and consider investing in a FTSE…

Read more »

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 »