The 2020 stock market crash sent share prices plunging across the board. Investor confidence evaporated and many fled traditional equities in search of alternative assets such as gold. As a result, in the depths of the sell-off, the FTSE 100 index shed 32% of its value. Since then though, global stocks have risen sharply, prompting fears of a second stock market crash. However, regardless of whether another major sell-off is around the corner, I’d still buy the best UK shares today in order to build serious wealth.
Second stock market crash?
But just how likely is a second stock market crash? Well, nobody can know for sure. That said, there are a few factors at play that could prove to be a catalyst for another major sell-off. For example, a second wave of coronavirus infections remains an ever-present threat. Rising tensions between the US and China could also soon take their toll on financial markets.
That said, here at The Motley Fool, we’re firm believers in investing for the long term. That means holding your investments for at least five years, but ideally, for much longer. That way, the impact caused by a major sell-off is vastly reduced as your holdings have a longer time period to recover and reach new highs.
Moreover, I’d view a second stock market crash as another opportunity to buy the best UK shares at hugely discounted prices. After all, being greedy when others are fearful is a tried and tested method for building capital.
I’d stick to buying the best UK shares
Nevertheless, I wouldn’t bank on a second sell-off. First and foremost, the stock market is not the economy and financial markets are notoriously forward-looking. Therefore, the much anticipated second market crash might never even happen. With that in mind, I’d press on with buying good-quality shares today, provided you’re in it for the long term.
When it comes to finding the best UK shares to invest in right now, I’m looking out for companies displaying an element of resilience despite unfavourable trading conditions. For example, businesses that have continued to thrive throughout the period of the pandemic may be wise investments moving forward, especially as the economy continues to get back on its feet.
Similarly, investing in defensive stocks could be a solid move for those concerned about long-lasting market volatility. The reason being, companies with defensive characteristics can often prove to be a safety net to investors during turbulent times.
Finally, I think those feeling more adventurous would do well to focus on companies situated within industries possessing the most growth potential. In my view, this means targeting stocks in the technology, e-commerce, and healthcare sectors.
Building a six-figure portfolio
Once you’ve invested in a basket of diversified UK shares, it’s time to sit back and let the wonders of compounding take over. To illustrate, let’s say you invested £500 monthly and managed to achieve an annual return of 8% (the average return of the FTSE 250 is substantially higher at around 12%). After 35 years, your investment pot would be worth £1,078,202.
As such, regardless of a second market crash, I’d stick to investing in some of the best UK shares today in order to build wealth over time.