Market crash 2020: I’d buy today’s cheap stocks to retire early

Buying today’s cheap stocks following the 2020 market crash could lead to high returns over the long run, in my opinion.
The post Market crash 2020: I’d buy today’s cheap stocks to retire early appeared first on The Motley Fool Australia. –

Wooden arrow sign stating 'retirement' against backdrop of beach

The 2020 stock market crash has left many shares trading at relatively cheap prices. Ongoing risks such as the coronavirus pandemic and political uncertainty in Europe mean that the valuations of some companies have failed to rebound to their 2019 levels.

As such, there may be buying opportunities available on a long-term basis. Over time, the valuations of today’s cheap stocks could improve. In doing so, they could aid an investor in building a retirement nest egg from which to draw a passive income in older age.

Cheap stocks after the 2020 stock market crash

The 2020 stock market crash has caused investors to re-evaluate their views on a number of sectors. For example, companies operating in industries that are being directly impacted by a weak economic outlook have seen their valuations come under severe pressure. They include sectors such as banking, energy and travel & leisure, where the profit growth potential of many businesses is likely to disappoint in the short run.

While some cheap stocks have weak financial positions and lack competitive advantages over their peers, others may currently be undervalued. Investors may have devalued companies operating in unfavourable sectors without understanding their recovery potential, for example. This may provide long-term investors with an opportunity to use the 2020 market crash to their advantage, in terms of buying high-quality companies at a discount to their intrinsic values.

A stock market recovery

Today’s cheap stocks could deliver strong recoveries from the 2020 stock market crash. Ultimately, an improving economic outlook that provides more prosperous operating conditions is likely to come into existence over the coming years. The world economy has, after all, always recovered from its periods of decline to post positive GDP growth. And, with large amounts of fiscal and economic stimulus having already been announced in major economies, the outlook for the world economy could improve significantly in the coming years.

With undervalued shares having significant capital appreciation potential, they may offer a sound means of generating a retirement nest egg. Their appeal on a relative basis seems to be high. A sustained period of low interest rates could be ahead. This may mean that the returns on cash and bonds fail to beat inflation by a substantial amount. And, with high house prices being present in many economies, the prospects for property investors may be less attractive than for those investors who buy cheap stocks after the stock market crash.

A long-term outlook

Clearly, a recovery after the market crash may take some time for today’s cheap shares. However, by taking a long-term view and holding high-quality companies through a likely bull market, an investor could improve their retirement prospects. They could even outperform the stock market through using its volatility to their advantage in the coming years.

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. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Market crash 2020: I’d buy today’s cheap stocks to retire early 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!