I have spent most of my investment life looking for opportunities to buy cheap UK shares. I believe it makes sense to buy FTSE 100 and FTSE 250 stocks after markets have crashed and top stocks are trading at bargain prices. It’s a great opportunity to build the wealth you need to get rich and retire early.
The problem is, nobody can accurately predict when markets will crash. Share price movements are impossible to predict. If you hold off for the perfect opportunity to buy cheap UK shares, you may never invest at all.
Last week gave a good example of this. The US presidential election was a massive political event with the power to shake stock markets, especially if the result was hotly disputed. Well it was disputed, and what happened? Investors hoping for an opportunity to buy cheap UK shares found they became more expensive instead.
The FTSE 100 flew, not crashed
Instead of crashing, markets climbed. The FTSE 100 ended the week around 6% higher. Why? Because investors liked the result. They were concerned that Democratic Party candidate Joe Biden’s programme of corporate tax increases, tech regulation and higher federal minimum wages would hit company profits. However, with the Republicans set to retain control of the Senate, the more radical measures are likely to be scaled back.
Investors celebrated. Share prices flew.
This morning, the FTSE 100 has jumped another 1.5%, and stands at exactly 6,000, at time of writing. Your chance to buy cheap UK shares was actually last week, when it brushed 5,500. It is up around 9% since then.
If you missed out, I wouldn’t worry too much. Despite the recovery of recent days, I think many UK share prices still look cheap. The FTSE 100 is down around 20% since the start of the year, so you have a buying opportunity right here, right now. There are top British companies trading at reduced prices all over the place.
I’m buying cheap UK shares today
Of course, you could hold off waiting for them to become cheaper still. The stock market could crash again, say, over Brexit, which is another massive political event with the power to move markets. However, I wouldn’t advise spending the next few weeks waiting for that to play out.
First, I think there’s still a fair chance we will strike some kind of deal. Second, nobody can say for sure how markets will react.
As we saw in the US, investors have an annoying habit of treating good news as bad, and bad news as good. For example, if there’s no Brexit deal and the pound crashes, the FTSE 100 could rise. That’s because companies on the index generate three quarters of their earnings overseas, which will be worth more when converted back into weaker sterling.
So don’t hold back hoping Brexit will deliver cheap UK shares on a plate. As ever, the best time to buy shares is today. Ideally in an ISA, for tax-free income and capital growth. That’s the best way I know to fund an early retirement.
You could start with this one.
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Harvey Jones 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.