I think today is a great time to buy cheap UK shares, but then I would say that. I think it’s nearly always a good time to buy shares.
I’m not scared that stock markets could crash if this year’s post-pandemic recovery disappoints or inflation makes a shock comeback. The ISA season is in full swing, and I’d rather buy cheap UK shares today than wait to see what happens tomorrow.
The first reason is that a stock market crash is impossible to predict. At any point of the investment cycle, we will find somebody saying the sky is about to fall in. They may be right one time in 10, and will boast about that for the rest of their lives.
The rest of the time they will be wrong.Â
Don’t try to time the market
If I listen to the doomsayers I will never buy UK shares when they are cheap, and end up kicking myself as a result. History shows that over the longer run, shares go up more than they go down. It therefore pays to put my money in the market whenever I have some to spare, and leave it there. Timing my entry is hopeless. I will get it wrong more than I get it right. While I wait, my money will be earning next to nothing in cash.
It is important to remember that shares pay dividends, as well as rising in value. The FTSE 100 is set to yield around 3.5% this year. Some top UK shares pay dividend income worth more than 6% or 7%, and many are cheap. I will not benefit if I am sitting on the sidelines, fretting over the next crash. Yes, shares do come with risk. But I will only earn that income if I buy them. And by diversifying, I reduce my single-stock risk.
I think there are plenty of dirt-cheap opportunities out there right now. Naturally, if stock markets do crash, they would get cheaper still. On the other hand, if markets rose, they would get more expensive. Since I don’t know which is going to happen, the best thing I can do is take my chances and snap up cheap UK shares when I see them.
I’d buy cheap UK shares now
If markets do crash later, I won’t kick myself. I’m not to blame. Instead, I will take the opportunity to buy more UK shares, at the cheaper price. And I will leave the rest of my money invested for the recovery.
It will come.
I understand why some investors run scared of a possible stock market crash. Nobody wants to invest only to see shares crash next day. The best way round this is to drip feed money in, to smooth over the ups and downs.
I invest every month. Sometimes I pick up UK shares when they are cheap. At other times, when they are expensive. Either way, it doesn’t bother me because in the longer run, buying and holding shares is the best way I know to build the money I need for my retirement.