A lot of investors have been worrying about the next stock market crash, ever since the last one. Many will have been deterred from buying UK shares as a result, fearing their value will plunge shortly afterwards.
By holding back, they missed the dramatic 1,000-point resurgence in the FTSE 100, a rise of 20% that leaves it trading at around 6,000 today. That’s the danger of waiting for the perfect time to invest in UK shares. You simply don’t know what’s going to happen next. Nobody predicted the last market crash, and they won’t call the next one correctly too.
That’s right, there’ll be a next one. There always is, because that’s what stock markets do. They crash. Regularly.
Buy UK shares when they are down
According to Wikipedia, we’ve been through 14 global stock market crashes since the turn of the millennium, although you won’t recall most of them. The ones you will remember are the dotcom bubble in 2000, the financial crisis of 2007/08 and, of course, the Covid crash in February/March this year.
What did those three stock market crashes have in common? They hurt at the time, but markets recovered after a while. Investors who bought UK shares when markets were down cashed in when they bounced back. This will have boosted their chances of building a sufficiently large pot of money to get rich and retire early, which is what investing is all about.
We now find ourselves in an in-between world. Share prices have been idling for several months. Investors are watching and waiting to see where they go next.Â
By rights, stock markets should be crashing. The second wave of the coronavirus is upon us. The UK isn’t the only country desperately trying to strike a balance between saving the economy and saving lives. Some major industries, such as travel and cinema, have been almost destroyed.
Share prices are now underpinned by stimulus totalling trillions of dollars. Politicians are scared to let stock markets crash, for all the wider damage that will cause. That’s something to bear in mind if you’re worried about investing at today’s prices.
Forget the stock market crash and buy shares
I wouldn’t recommend holding back from investing today in the hope of taking advantage of a stock market crash tomorrow. The market could rise instead, making shares more expensive rather than cheaper. If that happened, you might look back on today as a missed opportunity.
So when is the very best time to buy shares? The answer is simple. Whenever you have a bit of money to spare. The stock market will make it work harder than almost any other asset class, even if it does crash from time to time. Better still, you can take your returns free of tax inside a Stocks and Shares ISA.
So don’t worry too much about the next stock market crash. If it happens, do what you should always be doing. Buy shares to boost your chances of retiring rich.