The 2020 stock market crash is the best investment opportunity that British investors have had for 10 years. It’s a full six months since the initial shock and appetite for UK shares remains extremely weak. While the Dow Jones has erased all of its losses for 2020, the FTSE 100 remains more than 20% lower, below 6,000 points.
This means that many top-quality UK shares can be snapped up at rock-bottom prices. These are unnerving times for investors and another stock market crash can’t be ruled out as Covid-19 continues spreading. But our view here at The Motley Fool couldn’t be more clear. If you want to make great returns from your UK shares portfolio you should buy after market crashes.
Follow the ISA millionaires
Stock market crashes are brutal. Panicked people do desperate things and in the context of share investing, this means that brilliant blue-chips are sold along with vulnerable companies and the genuine duds. Even UK shares with strong balance sheets, defensive operations, strong competitive advantages, and counter-cyclical operations have been chucked on the bonfire.
This gives proactive investors the chance to steal a march on everybody and supercharge their long-term returns. UK shares like these can be bought at much cheaper prices today than the price at which you’ll eventually be able to sell them. As the economic cycle improves, profits rise again, and confidence returns to share markets, the price of said UK shares will balloon.
Buying on the dip is what allowed so many Britons to make millions during the 2010s. They bought UK shares in products like Stocks and Shares ISAs after the 2008/09 market crash and watched them soar in value. The global economy moved back into growth, supported by massive monetary support from central banks. I expect fresh money printing to bolster the recovery this time around too.
Remember the FTSE 100
The strong share price recovery following the 2008/09 stock market crash was no one-off either. Between 1990 and 2019, the FTSE 100 rose steadily and ended up soaring more than 220% in total. Yet this was a period that included events like the Asian financial crisis of the late 90s, the bursting dotcom bubble a few years after that, the 2008/09 banking sector meltdown, and the Chinese market crash of a few years ago.
These temporary setbacks weren’t enough to derail the FTSE 100’s impressive journey northwards. It’s true that Covid-19 poses unprecedented challenges to the global economy. But it seemed like the world was about to cave in during those aforementioned wobbles too. It didn’t happen, and those who kept buying UK shares made a killing.
Getting rich from UK shares
Investors clearly need to be careful when buying UK shares today. A prolonged and painful global downturn is a possibility and plenty of corporate casualties can be expected. But with the right investment strategy you can avoid these traps and still make excellent returns. And with the help of experts like The Motley Fool (and its library of special reports) you can boost your chances of getting rich following the 2020 stock market crash.
Royston Wild 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.