The Motley Fool

Forget gold and Bitcoin. I’d buy crashing UK shares in a Stocks and Shares ISA right now

UK shares may yet experience a further market crash as uncertainty surrounding factors such as Brexit and a second wave of coronavirus builds in the second half of 2020. While this may naturally cause some investors to focus their capital on other assets such as Bitcoin and gold, the long-term prospects for FTSE 100 and FTSE 250 shares appear to be bright.

Through buying a range of bargain stocks today in a tax-efficient account such as a Stocks and Shares ISA, you could obtain strong growth in the long run as a stock market recovery takes hold.

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The past performance of UK shares

Investing in UK shares is never an easy task. One of the biggest challenges facing any investor is overcoming a natural urge to avoid buying stocks when they are priced at their most attractive levels.

For example, in previous economic crises investors have often sold or avoided the stock market in favour of other assets. While this may have been a sound short-term move in some cases, over the long run it can mean that such investors miss out on the stock market’s eventual recovery.

Therefore, while it may feel unnatural to buy UK shares when their risks are elevated, it can mean that you are able to obtain the most attractive prices. And, with the stock market having always recovered from its very worst recessions and bear markets, adopting a buy-and-hold strategy can prove to be very profitable over the long run when you are able to purchase high-quality companies at a discount to their intrinsic values.

A simple approach

Of course, it is currently too soon to know what the long-term outcome of the coronavirus pandemic and lockdown will be on a variety of sectors and UK shares. Therefore, adopting a simple strategy could be a logical move. This may mean that investors diversify across a range of sectors and purchase companies with solid balance sheets. Furthermore, they may wish to invest through a tax-efficient account that is cheap to administer and simple to manage, such as a Stocks and Shares ISA.

Certainly, this plan may not produce returns that are as high in the short run as other assets such as gold and Bitcoin. However, the past performance of the stock market suggests that a long-term recovery for indexes such as the FTSE 100 and FTSE 250 is very likely. Through using a tried-and-tested approach that focuses on buying and holding shares to minimise risk and still allows for high returns as the economy and stock market recover, you could generate surprisingly strong returns.

Therefore, with the threat of a second market crash and political challenges such as Brexit still looming, now may be the right time to go against your instincts and buy cheap UK shares. Over time, they could produce high returns that improve your financial prospects.

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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.