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How investors learned to stop worrying and bought cheap UK shares in the stock market crash

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It may sound counterintuitive, but the best time to buy cheap UK shares is bang in the middle of a stock market crash. Your favourite companies are temporarily trading at knock-down prices, so you can pick them up on the cheap. All you need do then is wait for stock markets to recover, as history suggests they always do in the end.

It isn’t easy though. You have to defy the urge to panic and sell your shares along with everybody else. That’s challenging, especially when the TV and internet are pumping out terrifying headlines about a market meltdown. Happily, new research suggests Britons are rising to that challenge.

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Instead of worrying and selling UK shares when markets crash, investors have learned to buy them while they are cheap. When Covid-19 struck, the number of ordinary private investors buying company stocks spiked. Impressively, 1.5m people bought shares for the first time in their lives, according to a survey by specialist exchange-traded fund provider GraniteShares.

Stock market crash is a great buying opportunity

The biggest motivation, named by 30%, was because UK shares fell dramatically, and the chance to buy cheap stocks wasn’t to be missed. They got that right, with the FTSE 100 rebounding more than 20% from its March lows.

Another 25% said they wanted to take advantage of increased share price volatility. That also makes sense, because when markets are volatile you can find top UK stocks trading at dirt-cheap valuations,

A further 22% bought when share prices started to rise dramatically, because they didn’t want to miss out. There’s a whiff of herd mentality about this one, but if you buy UK shares in the early stages of the recovery, it can still pay off.

When shopping for cheap UK shares, always keep your eye on the long term. At The Motley Fool, we encourage people to buy and hold shares for decades, to steadily build their wealth for their retirement. Never trade in the hope of making a fast buck.

Unfortunately, GraniteShares’ research shows many investors are doing exactly that. Worryingly, 11% were trading because they could no longer bet on sporting events that had been cancelled. Investing is a long-term process, not a short-term flutter. You should aim to build a balanced portfolio of FTSE 100 dividend and growth stocks, to reduce the risk if one underperforms. Making short-term trades usually backfires.

Buy cheap UK shares for the long term

Most alarmingly, 11% were trading because they’d been made redundant and wanted to make money. Now that really does worry me. You should never try to trade your way out of financial problems.

Investors cannot resist cheap UK shares. Many are buying stricken engineering firm Rolls-Royce, GraniteShares says. Fallen banks Barclays and Lloyds Banking Group are also popular, as are troubled energy giants BP and Royal Dutch Shell. All look tempting at today’s valuations, but please, understand the risks.

Others are buying US tech stocks such as electric car maker Tesla Motors, online retail giant Amazon and iPhone maker Apple.

Right now, I’m targeting cheap UK shares. Thanks to the stock market crash, there are plenty of them out there.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Amazon, Apple, and Tesla. The Motley Fool UK has recommended Barclays and Lloyds Banking Group and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. 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.

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