I’m suddenly coming across articles by analysts warning of another stock market crash. This strikes me as odd, because a few short weeks ago, loads of analysts were talking up the forthcoming 2021 stock market rally instead. There is only one thing investors can do when faced with such conflicting views. Ignore them, and stick to their plan.
So what’s my plan? I believe stocks and shares remain the best way to build long-term wealth for my retirement. As a freelancer, I cannot rely on an employer’s scheme to fund my final years, because I don’t have one! I’m not going to rely on the State Pension either, because it isn’t generous enough to fund a comfortable retirement.
And I’m not leaving money in a high-interest savings account, because even the best pay less than 1%, and that’s barely enough to outstrip inflation. I believe equities are the best way to go, and that will continue to be the case, even if we do get a stock market crash this year.
I’m not afraid of a stock market crash
I’ve been investing for almost 25 years now, and I have seen a string of crashes and corrections in that time. I won’t bore you by listing all of them, but the biggies are the dotcom crash of 2001-03, the financial crisis crash of 2007-09, and last year’s Covid crash.Â
It wouldn’t be uncharacteristic for the stock market to crash in this year. As we saw after the tech boom and financial crisis, a correction can last a couple of years. In the middle, there will be boomlets as well. Maybe we had one last year.
That doesn’t worry me. My retirement is at least another 15 years away, and that gives me plenty of time to recover any losses. Also, like many people, I plan to remain invested in retirement rather than scoop all my savings together and buy an annuity. This means my money could be in the market for another 30 years, and the longer the timescale, the lower the risk tends to be.
I’m adding FTSE 100 stocks to my watchlist
There are good reasons why the stock market may crash again. I always felt the euphoria after November’s vaccine breakthrough was overdone. We face a sticky route out of lockdown, as countries close their borders. The new James Bond movie has been put back again, and I’m beginning to see that as a weathervane for the recovery.
But if markets do crash, I will see that as an opportunity to buy FTSE 100 shares at reduced prices. I might avoid the really high-risk sectors, such as airlines and hotels, but I would buy in banking, mining, technology, telecoms, energy, consumer staples, as well as lower-risk sectors such as healthcare and utilities.
That might not be suitable for every investor, but I believe it will work for me. Then I will simply hold on and let my dividends roll up, while waiting for the recovery. Like the stock market crash, that will come as well. They always do, given time.