There are folk out there banging on about a new stock market crash coming soon. But I won’t let that put me off my passive income shares.
I see a lot that are cheap now, and I don’t think they’ll be so cheap for ever.
So why risk missing the boat in the hope a better one might be along soon?
30% crash?
One headline suggests we could have a 30% crash just round the corner.
It’s based on the US. But what if I buy Lloyds Banking Group on a price-to-earnings (P/E) ratio of six, and it falls to 4.2?
Or Aviva shares with a P/E of 14, and that drops to under 10?
I’ll buy more, that’s what. As many as I can afford.
And, if the cash stays the same, a 30% share price fall would push the Lloyds dividend yield up to 8.4%, and Aviva’s to 10.7%.
Yields like those could be great for passive income.
My rule
I don’t think we’ll see a crash in the UK, though. The FTSE 100 just looks too cheap, with earnings and dividends on the up.
And I have one rule of thumb that I always follow.
Never put off buying cheap shares today in the hope they’ll be cheaper tomorrow. On average, they won’t.
Look at the UK stock market chart for the past century, and we see steady growth. Past crashes are barely visible. That’s what we’d be betting against if we wait for the next crash.
Other cheap shares
Which other FTSE shares do I think are so cheap now that I don’t care about the risk of falls?
I’ll tear myself away from finance stocks, and look for something different. With today’s bank risk, I do need some diversification.
And in the short term, I think bank and insurance shares could continue to disappoint.
Well, disappoint those who want quick growth, that is. If they stay low so I can buy more cheap and tie in some better passive income, it will delight me.
Hmm, most of the lowest P/E FTSE stocks right now are banks, mind.
US growth
But I do like some others.
Scottish Mortgage Investment Trust shares have slumped in the past couple of years, and I think they’re still too cheap.
It’s all down to the fall in the US Nasdaq tech stock index. But the trust’s shares fell further, and the Nasdaq has made up ground faster.
I’d say there’s a real chance of a new Nasdaq fall. But the stock’s 14% discount makes it look cheap to me.
The world might be turning from oil and gas. But Shell‘s P/E is under nine, with BP‘s at only six. Dividend yields are only around 4% to 4.5%, but there’s growth on the cards.
Perfect buy time?
There are lots more cheap UK shares out there. And FTSE 100 dividends look set to hit a new record of close to £90bn by 2025.
This sure seems like a great time for passive income investors.
