With the FTSE 100 index sitting at around 6,000 points, you may be wondering why on earth now would be a good time to buy UK shares. After all, the index is in the same position it was in 2016, and has failed to bounce back as strongly as its US counterpart, the S&P 500.
On top of this, the UK economy is in tatters as a result of the impact of Covid-19, which is showing no sign of letting up in the near future.
What’s more, shares in many major UK companies look downright unappealing at present. I’m thinking of well-established businesses such as Rolls-Royce (LON:RR), Royal Dutch Shell (LON:RDSa), and HSBC, each of which have taken huge hits in the aftermath of the sell-off.
The appeal of UK shares Despite all this, I’m confident that buying high-quality UK shares today is a wise move. Moreover, if you’re prepared to be in it for the long term, I reckon it could even boost your chances of making a million after the stock market crash of 2020.
But how? Well, many UK shares are trading on vastly reduced valuations at the moment, which is particularly appealing to value investors. Ultimately, with a great deal of stocks looking under-priced, now could be an ideal time to buy in ahead of a break out at some point in the future.
That said, it’s entirely possible that UK shares could continue to underperform in the short term. Additionally, I wouldn’t even rule out a second major sell-off. Either way, I wouldn’t be too concerned. History demonstrates that those who are brave enough to hold onto their shares after market corrections often go on to make a tidy return in the long run.
In fact, if UK shares do take another tumble, I’d use it as an opportunity to hoover up even more stocks at discounted prices.
Making a million after the stock market crash Ultimately, buying cheap shares in high-quality companies and holding them for the long term is a tried and tested method for building vast amounts of wealth. For instance, take a look at legendary investor Warren Buffett, who has made millions from buying undervalued stocks. Interestingly, Buffett says that if you don’t feel comfortable holding a company for 10 years, you shouldn’t even own it for 10 minutes!
When it comes to building your own six-figure portfolio, I reckon you could do far worse than follow some of Buffett’s key principles. Additionally, it doesn’t take eye-watering yearly returns to grow a vast sum over time. Hypothetically, let’s assume you invest £500 a month for the next 35 years in a mixture of diversified shares. Provided you achieved an average annual return of 8% (identical to the average yearly return of the FTSE 100 index) you’d have an investment pot worth £1,078,202!
With that in mind, I’d press on with buying cheap UK shares regardless of current market conditions. All things considered, keeping a calm temperament during temporary market downswings is key to implementing a solid long-term investment strategy and realizing a tidy return.
The post Here’s why I’d still buy cheap UK shares to make a million after the stock market crash appeared first on The Motley Fool UK.
Matthew Dumigan owns shares of Rolls-Royce. The Motley Fool UK has recommended HSBC Holdings (LON:HSBA). 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.
Motley Fool UK 2020
First published on The Motley Fool
