The 2020 stock market crash has created quite a dilemma for buyers of UK shares. On the one hand, fears of further market volatility and possibly another stock market crash are preying on investors’ minds. But then the pathetic returns on lower-risk investments like Cash ISAs mean that many feel they have no choice but to continue investing in equity markets.
Our view here at The Motley Fool couldn’t be clearer. If you want a realistic chance of making a million then share investing is the best game in town. Stock market crashes come and go and investors shouldn’t be put off by them. Studies show that individuals who build a well-balanced shares portfolio tend to make electrifying returns over the long haul.
Buy like Warren Buffett
At times like these it’s a good idea to remind yourself of the investing strategies of successful stock pickers. And few are more successful than billionaire investor Warren Buffett. Stock market crashes have never, ever dimmed his appetite for buying stocks.
In fact, his belief that investors should “be fearful when others are greedy and greedy when others are fearful” has been one of the cornerstones of his successful investing blueprint. His goal of buying undervalued, top-quality shares following a stock market crash has enabled him to get rich from rampant share price recoveries as economic conditions have gradually improved.
There are many macroeconomic and geopolitical problems and uncertainties that are treading on share investor confidence right now. Covid-19, US-Chinese trade wars, Brexit and rising civil unrest in the States are just some of the issues fanning fears of another market crash. But upheaval is nothing new, and history shows us that over the long run, stock markets still deliver exceptional returns to patient investors.
As Warren Buffett famously pointed out: “In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.”
Playing the stock market crash
So don’t be put off by the prospect of a second stock market crash. Even if the value of the UK shares that you buy falls in the near term you can, over the long run, expect your investments to still soar in price.
And by following some other key Buffett tips you can minimise any short-term price weakness your UK shares may otherwise endure. Buying companies with clear advantages (or’ economic moats’) over their competitors like excellent brand power, market-leading products, or low cost bases is another. Buying stocks below their intrinsic value is a good idea too. This offers a decent margin of safety in case of unfavourable events.
Don’t wait before taking the plunge with UK shares, I say. By following Warren Buffett and buying after the stock market crash you have a chance to supercharge your long-term returns. You could possibly even make a million or more.