Stock market crash: This could be a once-in-a-lifetime chance to buy cheap shares

The recent rally from the stock market crash of 2020 has left many investors sitting on the fence. And I can understand the sentiments leading investors to wait things out.

The pandemic is unprecedented in modern times. The crashing of economies around the world is something new. And the threat of a second upsurge in the virus hangs heavy in the air.                 

Just like many other stock market crashes

But in some ways, this has been just like many other stock market crashes. The reasons are different – as they always are – but the outcome has been the same for stocks. And the uncertainties surrounding the outlook chime with the fears following prior crashes. Markets always seem to climb a wall of worry on the way back up.

I only know one cure for overcoming the fear of investing, and that’s to invest. Indeed, some of the best investments we can make are when the outlook is grey and uncertain. When markets plunge, there’s an opportunity to buy good-quality stocks when they are selling more cheaply. And if you invest with a long time horizon in mind, buying cheaply can lead to outsized gains in the years ahead.

So, I’d cast aside fears of a second dip in the markets and target shares backed by good businesses, right now. Such action could be a good way of avoiding what I’d describe as ‘fence-sitters’ remorse’. And it looks like former hedge fund manager Stanley Druckenmiller could be suffering something similar right now.

In 1992, along with George Soros, he shorted the pound and made billions. But this week, he told CNBC his return of 3% from the March lows has “humbled” him. Over the same period, America’s Dow and S&P 500 both shot up by more than 43%.

It’s almost always a good time to invest in shares

It seems that Druckenmiller formed an opinion during the crash and is on record as saying, “The risk-reward for equity is maybe as bad as I’ve seen it in my career”. But he acknowledged later that he underestimated the lengths the Fed would go to help support the financial markets. Indeed, I reckon governments everywhere have been throwing everything they can at the crisis, and it’s pushed share prices higher.

Yet when we examine Druckenmiller’s reasons for avoiding stocks – just as they were at their cheapest – I reckon he was fearful or cautious, just like many of us. Even super-successful investors get things ‘wrong’ from time to time.

But if you are investing for the long term – perhaps to build a pot of money for your retirement – it’s almost always a good time to invest in shares. I reckon one of the keys to building sizeable gains from shares and share-backed investments is to invest regularly, perhaps every month. Another is to compound your gains by ploughing dividends and gains back into your investments. A third is to invest for a long time. And a fourth is not to run scared when the markets dip.