The stock market is a wild ride, and the fear of a crash can be a real downer. But what if the market takes a nosedive in 2026? It's a scary thought, but let's dive into why it might not be as terrifying as it seems.
The market's ups and downs:
The FTSE 100 has had its fair share of fluctuations over the past decade. While it returned an impressive average of 8.5% annually, there were years when share prices took a hit. In 2018 and 2020, investors saw their January investments lose value by December. But here's the twist: even in those 'bad' years, the market bounced back.
The power of time:
Take 2020 as an example. Despite the FTSE 100 falling 11.5% that year, a £10,000 investment in a tracker fund at the start of 2020 was worth more by early 2026, with an average annual return of 7.9%. Time can be a powerful ally in the stock market, turning even the rockiest of years into profitable ventures.
Coping with crashes:
The secret to surviving market crashes is simple: stay invested. Selling when prices are low is a surefire way to lose money. Those who held on to their investments during the 2020 dip, or even bought more shares when prices were low, likely saw healthy returns. And this is the part most people miss—the potential for growth after a crash.
Quality companies as a safety net:
Investing in quality companies can provide a sense of security during market turbulence. For instance, JD Wetherspoon, a FTSE 250 pub chain, has consistently grown its sales despite challenges. Its focus on value and its cost advantage make it a compelling investment, especially for beginners. By focusing on the fundamentals of a business, investors can make more informed decisions and avoid panic selling.
The stock market is unpredictable, and crashes are a part of its nature. But with a long-term perspective and a focus on quality, investors can navigate these storms and potentially come out ahead. And this is where it gets controversial—some argue that market crashes are opportunities in disguise. What's your take? Is a market crash a reason to panic or a chance to buy quality stocks at a discount?
