The Motley Fool

The 2020 stock market crash: does it reveal what kind of investors we are?

Image source: Getty Images.

Investing during a bull run is challenging enough. But I think a stock market crash can really bring out what kind of investors we are. I’m not talking about long-term versus short-term investors. It’s always long-term for me, and I see anything else as reckless.

It’s not about strategy either. Are you looking for growth shares, expecting to take some losses but pick up the occasional big win? Do you invest for dividend income, happy to take the cash and forget the share price? I’ve gone for both strategies over the years, and both attract serious long-term investors. And a stock market crash can certainly impact both. The key pain for income investors is that dividends have been cut way back this year. And many growth investments have gone into sharp decline.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

No, out on my daily walk one morning, another split between types of investors struck me. Some are interested only in the money, while others see intellectual and emotional, attachment beyond that. I’m not going to try to claim either kind is superior. In fact, if I’d been more focused just on the money over the decades, in a purely objective manner, I feel sure I’d have done better. But would I have changed the way I deal with a stock market crash?

Do I lack objectivity?

I’m definitely one who sees an investment as more than just about the money, for better or for worse. As one example, I’ll miss what I see as otherwise good investments for ethical reasons. So I won’t buy shares in British American Tobacco or Imperial Brands. I think both are seriously undervalued right now. British American is on a forecast dividend yield of 8.5%, with Imperial on 11%. And both are on very low P/E ratings. I wouldn’t fault anyone for taking advantage of that and buying the shares. But I won’t, because I don’t want to be part of that business. It’s entirely personal.

Another example is the collapse of potash miner Sirius Minerals. A 100% failure is way harder than most falls in the 2020 stock market crash, and it took a couple of thousand pounds of my money with it. And yes, losing that kind of cash was painful. But I also shared that failure personally. It was my company, you see, not just some money. Does that kind of thinking damage my ability to assess investments? I’m not sure, but I definitely find it hard knowing when to get out.

Handling a stock market crash

And does my approach make it harder for me to deal with a stock market crash? No, it really doesn’t. That’s because, over the years, I’ve come to see such things as opportunities rather than threats. Glass half empty, or half full? It’s that kind of thing. And for me, that’s maybe the most important investing difference revealed by the Covid-19 crash.

I’m not fretting over this year’s FTSE 100 losses. No, I’m thinking about all the gains to come next year, the year after, and in a decade’s time. Looking around the shares that have slumped this year, I’m seeing a lot of glasses that look like they’re nearly empty. But if I buy now, I reckon I should see them overflowing over the longer term.

5 steps to prepare for the next market correction…

It’s ugly out there…

The threat posed by the coronavirus outbreak have spooked global markets in 2020, sending stock prices into a nosedive.

We’ve now entered our second national lockdown, and investors are worried that another stock market crash could be around the corner.

Against such a backdrop of market worry, it’s little wonder that many investors feel panicked. (After all, nobody likes to see the value of their portfolio fall significantly in such a short space of time.)

Fortunately, The Motley Fool is here to help, and you don’t have to face this alone…

Download a FREE copy of our Bear Market Survival Guide today and discover the five steps you can take right now to try and bolster your portfolio… including how you can even aim to turn today’s market uncertainty to your advantage.

Click here to claim your free copy of this Motley Fool report now.

Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has recommended Imperial Brands. 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.

Our 6 'Best Buys Now' Shares

The renowned analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply enter your email address below to discover how you can take advantage of this.

I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement.