While many stocks are still trading low after the recent stock market crash, perhaps now is the time to buy undervalued stocks, rather than gold or Bitcoin.
Buying Opportunities Among UK Equities
Despite the rebound by the FTSE 100 and the FTSE 250 since March, many UK stocks are trading at prices well below their historical averages. This could create a buying opportunity for long-term investors, as in many cases these companies have strong balance sheets and long-term recovery potential. This means that they will likely have sufficient liquidity to survive what could be a difficult time for the economy and to improve their financial performance in the years to come.
Investors such as Warren Buffett have seen tremendous success buying undervalued stocks when other investors turn to other assets. By focusing on high quality companies that are likely to thrive in the next economic boom and buying them at prices that do not fully reflect their growth potential, it is possible to achieve above market returns over a period of time. prolonged.
Of course, UK stocks can take a considerable time to experience a sustained recovery after a stock market crash. Some past bear markets took many years to return to all-time highs. Therefore, some investors may think that buying Bitcoin and gold in the meantime, and potentially benefiting from the continuation of recent upward trends, is a good decision.
The problem with this strategy is that a stock market rally is not evident until after it has occurred. As a result, investors may end up buying stocks when they are trading at less attractive prices after a recovery begins. The timing of the market is notoriously difficult, which means that a better option might be to identify high quality companies with strong fundamentals now and buy them for the long term. In doing so, you will likely benefit greatly from the next bull market.
Also, UK stocks may offer a more favorable risk / reward opportunity than gold or Bitcoin. The price of gold has hit a new high, while Bitcoin’s lack of fundamentals means it is impossible to accurately value virtual currency. As such, following Warren Buffett’s proven and successful strategy of buying undervalued companies and holding them for the long term could be a superior way to increase the value of your portfolio in the years to come.
The opinions expressed on the companies mentioned in this article are those of the author 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 information makes we are better investors.