Investing money after the stock market crash could be a very profitable long-term move. At the present time, many UK shares trade at cheap prices that do not appear to fully reflect their prospects over the coming years.
As such, now could be the right time to start investing even modest amounts of money in a selection of British stocks. Doing so could lead to a nest egg that helps to bring your retirement date a step closer.
Investing money after the stock market crash
Buying UK shares after a stock market crash has been a successful strategy over recent decades. The main reason for that is the stock market’s recovery potential after its downturns. It has always bounced back from even its very worst bear markets to post new record highs. For example, the FTSE 100 started life at 1,000 points in 1984. Since then it has experienced a handful of bear markets and many more downturns, yet it now trades almost six times higher than it did 36 years ago. When reinvested dividends are included, its returns are even more impressive.
Clearly, there is scope for another stock market crash in the coming months. Risks such as Brexit and coronavirus look set to persist between now and the end of the year – and possibly beyond that date. However, their presence means that many high-quality businesses continue to trade at low prices that suggest there are margins of safety on offer. And, with their long-term recovery potential being high, now could be the right time to start buying them.
Investing regularly in UK shares
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Investors do not need to buy large amounts of UK shares after the stock market crash to benefit from its long-term recovery prospects. The index’s historic 8% annualised total returns mean that even modest amounts of capital can really add up to a large nest egg over the long run.
For example, investing £50 per week at an 8% annual return could lead to a portfolio valued at over £760,000 within a 40-year time period. And, with commission costs being low and it being relatively straightforward to open a sharedealing account, the stock market is accessible to a wide range of investors.
Certainly, not all investors will have 40 years through which to capitalise on the recovery potential of UK shares after the stock market crash. However, the past performance of indexes such as the FTSE 100 shows that on a long-term basis they have the capacity to turn modest amounts of capital into significant end valuations. Therefore, anyone who is seeking to retire early may wish to capitalise on the low prices of UK stocks after the recent stock market crash. They could lead to impressive returns in the coming years that improves your financial outlook.
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Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
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