How I’m investing in the worst stock market crash since 1987

That was the most devastating stock market crash since Black Monday 1987. So how do we take advantage? This is how I’m investing.

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.

Any doubt that we’ve just witnessed widespread economic shock has disappeared. The most devastating stock market crash since Black Monday 1987. Positions wiped out. Portfolios decimated.

It’s a pretty scary place to be. My collection of FTSE 100, FTSE 250, and AIM shares, plus index tracker funds is down by around 15% at last count. That’s a lot of money.

So what now? Where do we go from here? Crucially, how do we take advantage?

One thing to note is that a massively over-leveraged and value-inflated stock market just got a whole lot cheaper.

Blood on the streets

If you’re a long-term investor and you’ve never witnessed scenes like these, you’re not alone.

Even I’ve thought about selling up as a knee-jerk reaction. It makes sense, right? To liquidate everything then have that ready cash on hand for when valuations are right at the bottom. Well, no. The issue you face is when to buy back in. No-one can tell you the future. Does a market rebound represent the green shoots of recovery or a dead cat bounce before another shocking plunge?

If you sell out now, you have potentially tens of thousands of pounds at your fingertips, your entire financial future hovering at the click of a button. There’s intense pressure not to make a mistake. You’ve already sold your entire holdings at bargain basement prices. Getting this wrong could mean the end of your retirement plans for good.

Look away

I think I checked my Stocks and Shares ISA app about 20 or 30 times yesterday. I couldn’t believe what I was seeing. While the circuit breakers were firing off on the S&P 500 the same was happening in my brain. I couldn’t believe it. All those gains, wasted. All that slow and steady progress, down the drain. Disappeared in a puff of smoke.

Logic is in short supply right now. But if you don’t need the money straight away, why sell now? Panic-selling in the middle of a market crash is a bad idea. It’s also about the worst possible thing you can do for your future financial health.

If you’re sitting on paper losses — like most of us are — then that’s all they are. Losses aren’t losses until they’re realised. Selling now would make them real.

My plan from here on out is to stay the course. I’ll delete any financial apps on my phone for a while. That’ll prevent any really stupid decisions I’ll regret. I’ll keep adding spare cash to my ISA account, but sit on the sidelines and wait. It’s better to lose a tiny bit of the rise to be more sure that the stock markets are in recovery. Then you’ll see bargain share prices not seen in a generation. That could be a matter of weeks, or months ahead. But look back 10 years from now and you’ll be furious at yourself for not having bought more.

What to watch

Good companies with low debt will recover faster from this economic crash than those with hefty loans weighing them down. Those businesses that have relied on generous lines of credit to stay afloat could have to make redundancies. No doubt, earnings and profits will crater. And investors will flee to safer options. Do your research to identify the strongest prospects. Set up your watchlist and keep cash on hand.

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.

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

2 promising British value stocks I’d consider for a Stocks & Shares ISA next year

Despite the recent slowdown, the Footsie is still packed with exceptional stocks and shares. Here are two our writer would…

Read more »

Investing Articles

After falling 28% my favourite growth stock looks dirt cheap with a P/E of just 9.6!

Harvey Jones wonders whether the sell-off in his favourite FTSE 100 growth stock is a dire warning or an opportunity…

Read more »

Investing Articles

Here’s how I’d target £10k passive income a year by investing just £100 a week

Think we need to be rich to retire on a solid passive income stream that we don't have to work…

Read more »

artificial intelligence investing algorithms
Investing Articles

My favourite income stock is suddenly 20% cheaper and yields 7.26%! Time to buy more?

Harvey Jones has just seen the gains on his favourite FTSE 100 income stock largely wiped out as the shares…

Read more »

Young Caucasian girl showing and pointing up with fingers number three against yellow background
Investing Articles

3 stock market mistakes I’d avoid

Our writer explores a trio of things that can trip up investors who are new to the stock market. Each…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

Just released: our top 3 small-cap stocks to consider buying in October [PREMIUM PICKS]

Small-cap shares tend to be more volatile than larger companies, so we suggest investors should look to build up a…

Read more »

Investing Articles

How I’d use an empty Stocks and Shares ISA to aim for a £1,000 monthly passive income

Here's how using a Stocks and Shares ISA really could help those of us who plan to invest for an…

Read more »

Investing Articles

This FTSE stock is up 20% and set for its best day ever! Time to buy?

This Fool takes a look at the half-year results from Burberry (LON:BRBY) to see if the struggling FTSE stock might…

Read more »