How a stock market crash gives retail investors a chance to buy cheap shares

July 5, 2021 0 Comments

first_img I’m sure you’ll agree that’s quite the statement from Motley Fool Co-Founder Tom Gardner.But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.What’s more, we firmly believe there’s still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.And right now, we’re giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool. See all posts by Kirsteen Mackay Image source: Getty Images Enter Your Email Address “This Stock Could Be Like Buying Amazon in 1997” I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement. Kirsteen owns shares of BP and Royal Dutch Shell B. The Motley Fool UK has no position in any of the shares mentioned. 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. How a stock market crash gives retail investors a chance to buy cheap sharescenter_img With so much chaos in the US markets, there’s increasing chatter that a stock market crash could happen in the coming weeks. If it does, I think it’s important that investors like me don’t panic and sell their stocks at a loss. In fact, I’ll be buying instead. As happened in the months following the March market crash last year, many stocks saw their share prices eventually making a decent recovery. Some investors had sold out at the bottom, but those who bought in at the low point will have made a decent return.Is a stock market crash imminent?Whether a stock market crash is about to hit, or the financial markets are just enduring a short-term period of intense volatility remains to be seen. The increase in retail investors taking an interest in day trading is unprecedented. It’s something that’s shaken the Wall Street stalwarts and may well result in regulatory changes across the board. In the meantime, we’re witnessing a raging storm of individual investors versus the establishment. The reason some speculate that this may lead to a correction or crash is that many US stocks have valuations that seem unsustainably high, meaning it really might not take much to topple them.5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…With momentum driving many stocks to sky-high valuations, I think there’s a risk this could hurt retail investors. However, volatility presents an opportunity to buy stocks in a dip. While some share prices surge, others fall, and this gives investors the chance to buy their favourite shares when they’re cheap.Systematic risk vs unsystematic riskMuch as I’m keen to buy shares in a crash, I can’t deny that there are risks involved. And the types of risk vary. Systematic risk is the risk present in the overall market, and there’s little we can do about it as retail investors. The present battle against the hedge funds is an example of unexpected systematic risk. The opposite of this is unsystematic or diversifiable risk, which concerns specific risks a company or its industry faces. This is easier to consider when choosing which stocks to buy.For example, the oil industry is in decline because the rise of green technology and renewable alternatives are favoured just now. This means oil stocks are deemed risky by some. I understand these risks to the sector, but I still like investing in individual oil stocks such as BP and Shell. That’s because the world still uses oil in many of the things we take for granted daily. Therefore, I don’t believe the demand for oil is going to disappear into thin air. I also like that BP and Shell are diversifying into renewables, so their energy portfolios should balance out in the future.Preparing for a stock market crashAs a retail investor, I think it’s always a good idea to prepare for the worst. This approach can help protect my portfolio from unexpected trouble. How do I do that? Diversification is a good hedge against problems specific to sectors or individual stocks. I think it’s also a good idea to have some money in cash ready to buy the stocks I like when a correction or market crash comes. I like to monitor the markets and research companies I’m interested in. Then, when I see their prices fall, I can buy cheap shares, reasonably confident there’s value in my purchase. 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