You need to be brave to buy UK shares in the aftermath of a stock market crash. While you can find bargain FTSE 100 shares everywhere you look, you never know for sure whether share prices will crash again.
That said, this applies at any time. Investors never know for sure what shares are going to do next. The stock market might crash. Or it might soar. Nobody knows until it happens. Alternatively, it may go nowhere for a while, as UK shares have largely done for the last four or five months. Again, nobody knows.
So please, put away that crystal ball. It doesn’t work. It never did. The only thing we know for sure is that the FTSE 100 now trades around 20% lower than before the stock market crash in March.
We could get stock market crash part 2
This means you can buy UK shares at big discounts, and should be scouring the market for opportunities. There is, of course, a good reason why equities are cheaper. The Covid-19 pandemic is like nothing else in our lifetimes. It has locked down huge chunks of the global economy. Sectors such as travel, hospitality and entertainment have been ravaged. Some major household name stocks may never recover.
The pain could intensify in the weeks ahead, especially if the government continues to flap in the face of a resurgence in infections. When furlough ends on 31 October, millions risk losing their jobs and that will further depress the economy. UK shares could feel the knock-on effect. We could get a stock market crash part 2. Or we might not. Nobody knows.
Coronavirus isn’t the only threat out there. The US presidential election is bound to deliver more shocks, and may not even give us a clear result on 3 November. Donald Trump has suggested he will challenge any defeat, which could lead to weeks, or months, of legal wrangles and social unrest. That won’t help investor sentiment. And UK shares could suffer.
Here’s why I’d buy UK shares today
Then, of course, we have Brexit. If the UK crashes out of the EU in a temper on 31 December, UK shares will probably plummet. Right now, that probably isn’t the way to bet, as we seem to be edging towards some kind of deal. Again, nobody knows.Â
The problem is you cannot hold back from investing until all these problems are resolved. Even if they are, new ones will emerge. The after-shocks of this year’s pandemic will reverberate, long after we finally get a vaccine. At some point, you have to take the plunge and buy UK shares to build wealth for your future. If markets fall further, buy more at the reduced price.
The key is to hold for the long term, say, 10, 20, or 30 years. The longer you are invested, the more time you have for your dividends to roll up. So when is the best time to buy UK shares? Whenever you have the money.