Insights

3 reasons why I’d buy cheap stocks right now and hold them to 2030

Investing money in cheap stocks today could lead to impressive returns over the next decade – especially on a relative basis.
The post 3 reasons why I’d buy cheap stocks right now and hold them to 2030 appeared first on The Motley Fool Australia. –

A chalkboard road with a yellow sign saying 2030, representing the way forward for ASX companies

Despite the stock market recovery over recent months, it is possible to buy cheap stocks today. They could be appealing because their prices may undervalue their long-term prospects. This could mean that they offer long-term capital growth potential.

Furthermore, the stock market has an excellent track record of recovering from its downturns to post new record highs. This could increase the chances of today’s cheap shares posting turnarounds.

Meanwhile, other mainstream assets such as cash and bonds offer very low returns at the present time. This may increase the appeal of undervalued shares on a relative basis.

Cheap stocks may be mispriced

It is difficult to determine the value of many companies today. Their financial performances are being disrupted by coronavirus in many cases, which could mean lower profitability in the short run. However, a number of cheap stocks appear to be undervalued based on their long-term growth potential. For example, industries such as banking and retail are likely to ultimately return to more attractive operating environments in the coming years. Therefore, current levels of profitability may undersell their prospects.

Buying any asset at a price that is lower than its intrinsic value is likely to increase the chances of generating positive capital returns. With sentiment currently very weak in some sectors, there may be opportunities for investors to buy high-quality companies while they offer wide margins of safety.

A track record of recovery

The chances of a long-term recovery for many of today’s cheap stocks appear high. The stock market has experienced numerous downturns in its past, and has always been able to produce new record highs. Similarly, the world economy has experienced many recessions and periods of slower growth. It, too, has always bounced back to post positive GDP growth.

With many major economies likely to benefit from stimulus packages over the coming years, the outlook for many regions could be positive. This may lead to rising profitability for many of today’s undervalued shares that allows them to command higher stock prices over time.

The relative appeal of cheap shares

Buying cheap stocks could be even more appealing because of the lack of value available elsewhere. Bond prices have risen to high levels over recent years in response to low interest rates, while property prices have surged in many major economies for the same reason. Meanwhile, cash returns are extremely low, and could even be below inflation over the long run.

As such, on a relative basis, cheap shares could be attractive purchases. Certainly, they may experience further challenges in the short run from a tough economic outlook that leads to disappointing financial performances. However, over the coming years a portfolio of undervalued stocks could realistically produce high returns that improves an investor’s financial situation.

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

See The 5 Stocks

*Returns as of June 30th

More reading

Motley Fool contributor Peter Stephens has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post 3 reasons why I’d buy cheap stocks right now and hold them to 2030 appeared first on The Motley Fool Australia.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;


To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.


An active and funded account with a positive trading balance is required to continue to have access to the tools;


Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;


Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!