Is a stock market crash an investment opportunity?

Investing in the middle of a pandemic?

When you flick on Bloomberg all you see is red. Share prices around the world have tumbled consecutively for the past three weeks.

The global pandemic is creating scenes we only used to see in horror films.

The market has sunk into bear territory (a market drop of 20%) meaning we have seen the end of the world’s longest-ever bull run (period of expansion).

Since the major U.S. stock indexes hit their all-time closing highs this year, they’ve shed more than 25% of their value in a span of just 16 trading sessions.

To give perspective to the speed at which this crisis unfolded – it took 35 trading sessions during the Great Depression crash to achieve the same numbers.

However, despite the widespread panic all over the world. There has been a large amount talk from financial experts claiming that this situation is a ‘buying opportunity’.

Warren Buffett has famously said that investors “should be fearful when others are greedy and greedy when others are fearful.” He more recently commented ”opportunities come infrequently. A climate of fear is an investor’s best friend”.

What is the logic behind buying in a crisis?

The outlook for an investor – especially a new one – is currently quite scary. However, just for a moment let’s not get caught in the pandemonium and let’s look at history.

There is a light at the end of the tunnel. For every single bear market or stock market correction we have seen in history, we have subsequently seen a bull-market rally, where loses on stock market indices were recovered.

This means that equities or index trackers purchased in the midst of a crisis where the market reaches the bottom, will – upon recovery – see substantial gains.

Why you should seek financial advice

Whilst financial advisors gain the most credit from clients during periods of expansion. Their real value comes when markets are volatile, and investments need to be selected carefully.

Global markets are now in uncharted territory – we are currently bracing the effects of a global health crisis – stock prices of US companies were dangerously overpriced- Hong Kong is in political turmoil – The impact of Brexit hasn’t even started – the US-China trade war is far from over – US/Iran relation’s remain sensitive – Tensions rise between OPEC, Russia and the US and finally, we in the midst of a global climate crisis.

There is value to be found for investors looking to enter the stock markets over the coming months. However, in such uncharted territory professional advice can be the difference between success and catastrophe. If there is ever a time to seek financial advice to explore investment opportunities it is now.

 

 

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