Why I’d buy UK shares in a stock market crash!

Many people fear another stock market crash is imminent. But I think this provides a great opportunity to buy UK shares at knock-down prices.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

UK shares crashed in March, but many of them made a remarkable recovery. Now the rumour mill is rife with the expectation of another stock market crash. Pandemic restrictions on movement, a recession and the dark cloud of Brexit are all contributing to these whispers.

And the approaching US election could also have a knock-on effect on UK shares, because where the Dow Jones goes, the FTSE 100 often follows. Then there’s the US-China trade war and rising international tensions over Covid-19 responses.

Take Warren Buffett’s lead

All this doom and gloom could send any would-be investor running for the hills. But as long as there’s a stock market, there’ll be ordinary people making money. Rather than being put off by the fear mongering, take your lead from the professionals by observing how they invest.

Two such investors are billionaires Warren Buffett and Terry Smith. They take a long-term approach to investing and look for value in the companies they buy shares in. Buffett aims to buy low and hold for years. He only sells once profits have been realised and the company seems to have no further room for growth, or the sector is facing untold risk. Smith follows a similar premise, buying valuable companies with a profitable future ahead, strong margins and cash conversion.

Discovering quality in UK shares

I’d buy UK shares because there are many top-quality companies operating within the UK. And I think they’ll continue to be for many decades to come. When an entire market crashes, it provides an opportunity for savvy investors to pick up bargains. It also magnifies weakness and shows where companies were leveraging themselves on too much debt. Covid-19 has shown Cineworld to be an example of this.

While the travel and entertainment industries have suffered since the March market crash, the gambling industry has thrived. Flutter Entertainment has seen its share price reach all-time highs. Pharmaceuticals and technology have also done remarkably well. AstraZeneca’s share price has surpassed expectations and FTSE 250 star, Computacenter, has done the same.

Buying UK shares is straightforward. The key is not to get carried away by hype and hysteria. Before taking the plunge to buy shares, be sure to research the companies you’re interested in owning a piece of and be confident in your choices.

Plan for the next market crash

If you expect another stock market crash is imminent, then the best thing you can do is plan. If you’ve a clear idea of the stocks you want to own in your portfolio, you can be ready to swoop in and buy shares in your favourite companies when the prices hit rock bottom.

This is easier said than done. If you’re buying when everyone else is selling, it can be disconcerting. But the world’s most successful investors take this approach, and that’s how the markets keep surviving.

If you want to be like Buffett, invest in high-quality companies that have an edge on their competition. If they offer a dividend, all the better. Because that gives you a guaranteed return on your investment through good times and bad.

I think there are many brilliant companies listed in Britain, and UK shares make an excellent addition to a long-term investor’s portfolio.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Kirsteen has no position in any of the shares mentioned. The Motley Fool UK owns shares of Flutter Entertainment. 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.

More on Investing Articles

Investing Articles

How much would I need to invest in income shares to earn £300 a month?

What kind of lump sum would be required to earn £300 a month by taking advantage of some of the…

Read more »

Investing For Beginners

Up 31% in a month, could this FTSE 250 stock be getting bought out?

Jon Smith takes a look at speculation that's pushing the share price of a FTSE 250 share higher and considers…

Read more »

Investing Articles

Here’s how I’d follow Warren Buffett to start building passive income in 2025

Ben McPoland highlights one FTSE 250 firm with a strong competitive edge that he thinks can continue rewarding investors with…

Read more »

Investing Articles

Burberry shares: undervalued FTSE gems that are ready to rocket?

Burberry shares soared at the beginning of the week as the takeover rumour mill went into overdrive. Is Paul Summers…

Read more »

US Stock

Here are the latest share price forecasts for S&P 500 giant Amazon

Amazon has generated monster gains for investors over the last decade. And Wall Street analysts believe the S&P 500 stock…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

2 high-yield FTSE 250 shares I’d buy today — and 1 that I’d avoid

UK markets have felt some volatility after last week’s Budget and the FTSE 250 was no stranger to it. Our…

Read more »

Investing Articles

3 reasons the Rolls-Royce share price could soar over the next decade

Sustainable aviation fuel, narrow-body aircraft, and small nuclear reactors could all keep the Rolls-Royce share price climbing over the next…

Read more »

British flag, Big Ben, Houses of Parliament and British flag composition
Investing Articles

Here’s how much income I’d get if I invested my entire £20k ISA in cheap BT shares

BT shares are on the up but still cheap, while the FTSE 100 telecoms stock offers a good yield too.…

Read more »