We here at The Motley Fool don’t see stock market crashes as reasons to panic. The world never stops turning and so we should expect moments of extreme volatility as economic, political and social situations change. It’s not fun watching the value of your UK shares sink, of course. But it shouldn’t discourage you from investing in the FTSE 100 and other British share indices.
Studies show us that investors — those that buy stocks and hold them for a decade or longer — make an excellent average annual return of at least 8%. Over this sort of time horizon you’re more or less guaranteed to experience a shocking stock market correction first hand. But you’re also going to see the value of your UK shares rebound strongly as market confidence steadily improves.
So our view of stock market crashes here is two-fold. Those who’ve built a balanced portfolio of quality UK shares shouldn’t follow the herd and sell during the panic. These investors will sell at the very bottom of the market and won’t benefit from the inevitable (if gradual) market rebound, costing them a packet in the process.
And secondly, when stock market crashes happen you should be looking to increase your exposure to UK shares. Investors need to be a little more careful when buying during economic downturns like today.
However, there are always plenty of quality stocks with bright growth outlooks and robust balance sheets to choose from. Buying these UK shares following market corrections can let you pick these up at low cost. And then get seriously rich during the subsequent stock market rebound.
3 top FTSE 100 stocks to consider
The FTSE 100 alone is packed with low-cost UK shares that could rocket in price as the world recovers from the Covid-19 crisis and investor appetite picks up again. Housebuilding colossus Persimmon is one, a company whose strong balance sheet and robust profits outlook encouraged it to reinstate dividends in August. This Footsie firm trades on a low forward price-to-earnings (P/E) ratio of 12 times. It carries a mighty 4.7% dividend yield too.
Financial services giant Legal & General offers even better value than Persimmon. This FTSE 100 stock trades on a P/E ratio of just 7 times for 2020 while its dividend yield sits at 9%. Packaging giant DS Smith’s yield of 4.2% and earnings multiple of 13 times makes it an attractive value buy too. This UK share can expect profits to rebound strongly as consumer spending steadily improves.
Want to get seriously rich with UK shares?
So what are you waiting for? I believe the 2020 stock market crash provides a great opportunity for investors to turbocharge the profits they will make during the economic recovery. And The Motley Fool, with its huge catalogue of special reports, can help you make the most of this opportunity.
Royston Wild owns shares of DS Smith. The Motley Fool UK has recommended DS Smith. 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.