Even the best UK shares could get even cheaper in October if the stock market falls further. I wouldn’t panic though. Instead, I’d take it as an opportunity to help you retire early.
Another stock market crash
Last week was really tough for shares. But in my opinion 2020’s market crash isn’t over yet as it seems we’re currently experiencing another coronavirus wave. This is being seen in much of Europe, with additional restrictions on normal life expected. However, it’s not the only risk investors are facing. For the UK specifically, there are also still fears around Brexit. It looks likely there will be a no-deal divorce from the EU. Some experts even think it could be more damaging for the British economy than the Covid-19 lockdown. And don’t forget other issues like the US elections and growing US-China tensions.
So I expect another stock market crash in October. But I’m still buying. Here are the top UK shares I plan to buy next month.
My top UK share
We at The Motley Fool consider market crashes to be wonderful opportunities to buy brilliant undervalued companies for peanuts. But there’s another way of profiting from volatility. Have you ever thought of the kind of businesses to benefit from volatile trading? One I like is London Stock Exchange (LSE:LSE). It’s a marketplace where sellers and buyers come together to buy and sell securities. So the more we all trade, the better it is for the company’s revenues. Volatility refers to a period when too much trading takes place. At the same time, when too much selling takes place, people tend to go wild and even get rid of companies directly benefiting from volatility, including LSE. The share price chart for LSE illustrates this well as there’s a clear drop that happened along with the rest of the market.
London Stock Exchange share price
Source: Google Finance
You see, when there’s a stock market crash, people don’t have enough cash. That means they’re willing to sell everything they currently have. But after situations like this, the Bank of England (BoE) pumps even more money into the financial system. Many banks and investors hold bonds and quantitative easing sees the BoE buying bonds. This is highly supportive for banks and institutional investors and they rush to high-quality assets, such as LSE.
There’s another asset class that also benefits from volatility — gold. The shiny metal isn’t rallying now though. You might be wondering why. After all it’s a safe haven-investment. But it’s seeing the same issue as LSE shares — the temporary lack of cash. But just as in the case of LSE shares, gold prices should start surging after a cash injection from the BoE. Institutional investors will start buying gold with the extra cash they will get.
But gold doesn’t pay interest or dividends. Instead, investors have to pay storage and insurance fees. Although I’m bullish on gold, I’d like to benefit from combining top UK shares and the yellow metal. In order to do so, I’d buy the largest UK-listed miners. These companies should have long histories of operations and pay dividends.
Anna Sokolidou has no position in any of the shares mentioned in this article. 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.