While some investors live in fear of a stock market crash, I prefer to see it as a great opportunity to buy cheap UK shares. That partly comes from years of writing for Motley Fool. We urge readers to go shopping for shares in a correction, when their favourite stocks are suddenly trading at reduced prices.
When markets crash, investors tend to dump good companies along with the bad. By picking my targets carefully, I can load up on the very best cheap UK shares, and benefit when they recover. So when I hear experts saying we are in a stock market bubble and it may burst, I get ready to shop.
It is a lot easier to keep my cool knowing that retirement is still a long way off. Mine is more than a dozen years away, and even if stock markets do crash this year, I think there is plenty of time for them to recover before I retire.
I’m not scared of a stock market crash
My attitude may change as I get closer to retirement. However, at that point, I will hold some money in lower risk investments such as bonds, and will draw income from those until the stock market recovers.
This raises an interesting question, though. If I prefer to buy cheap UK shares in the sales, why don’t I only buy them in the middle of a crash? In other words, why would I buy them today?
The first answer is that I think UK shares are relatively cheap, with the FTSE 100 still trading more than 1,000 points lower than it did a year ago.
Now there is a good reason why UK shares are cheaper than they were, given the economic damage inflicted by the pandemic. However, this has also been matched by the unprecedented amounts of global stimulus unleashed by global central bankers. I think when the world finally emerges from lockdown, we will all go on a spree, and share prices will power upwards.
That’s only my view though. I could be wrong. People usually are when they make predictions!
I’m checking out cheap UK shares today
There is another reason why I would buy cheap UK shares today rather than wait for a crash. I have no idea whether the crash will come, let alone when. Nobody does. Predicting future stock market movements with any consistency is impossible. This market could rise 50% from here. If it then fell 20%, I would still be well ahead.
Also, if I’m out of the market, I will not be generating any dividends from my portfolio, or reinvesting them for growth. My money will not be working at all, especially if I leave it in cash.
We may see a stock market crash this year, we may not. I have no idea. Nobody does. What I do know is that UK shares look cheap enough to buy today. If markets crash, they will look even cheaper, and I will buy more of them.