I know it’s difficult to view the market crash as an opportunity when chunks of your portfolio evaporate every day, but it really is a great time to be investing.
Buying cheap stocks might not look like a great decision when these names get much cheaper a few days later, but investors must focus on the long term.
There’s no doubt in my mind that a good diversified portfolio will be worth much more a few years from now. You’ll probably look back at today wistfully, regretting not putting more cash to work during this market crash.
In fact, I’m going to take this logic a step further and say this market crash could be your opportunity to make a cool million dollars. That’s right; if you put a decent amount of cash to work today, I’m confident you’ll have enough to retire on that decision alone.
Let’s take a closer look at how this market crash could help turn you into a millionaire.
A glorious buying opportunity
The relationship is clear. If you buy during periods of market weakness, long-term returns are better.
Say we assume a typical stock will return 8% annually over the long-term on average. That’s the baseline.
If there’s a market crash and stocks fall significantly, folks who are picking up distressed assets at bargain prices will stand to make more money over the long-term. Nobody can quantify future returns, of course, but I think it’s reasonable to assume a 10% compound annual growth rate on a basket of stocks purchased today. It might even be more.
Just 2% more per year makes a huge difference for long-term returns. Say you invest $50,000 today and you put it to work for 35 years. If you earn an 8% return (assuming no taxes or other expenses), your investment would be worth a hair over $739,000.
While that’s an excellent result, it’s dwarfed by putting cash to work during a market crash. A 10% return on the same investment would be worth $1.4 million.
That’s right. You’ll end up with almost twice as much money by earning a mere 2% more every year.
There’s only one thing left to do. The correct path is to invest as aggressively as possible today, during the market crash. Here’s one stock to get you started.
Market crash investing idea
Enbridge Inc. (TSX:ENB)(NYSE:ENB) shares have been absolutely obliterated during this market crash. The stock has been hit two-fold: first the price of oil collapsed, and then investors sold because they needed liquidity for other investments. Shares are down around 33% in the last month alone.
The company continues to tell investors not to expect much turmoil. In fact, it recently reaffirmed 2020’s guidance, calling for a slight increase in EBITDA compared to 2019.
Remember, much of the oil that flows through Enbridge’s pipelines is from the strongest producers in the sector. These companies can keep on producing even through a market crash. It’s the smaller producers who have to worry.
Enbridge also gets a big chunk of its earnings from its natural gas utility and power generation businesses, two parts of the economy that shouldn’t see too much long-term damage from this recent weakness.
A big chunk of long-term returns could come from Enbridge’s succulent dividend, too. The current yield is an eye-popping 8.4%, and the company has already promised a raise later on in 2020.
Remember, Enbridge has increased its dividend each year since 2000. The company has already been through market crashes before, and it hasn’t cut the payout. Why would this one be any different?
The bottom line
Take advantage of today’s market crash and load up your portfolio with stocks like Enbridge. If you invest enough today and have a long-term time horizon, this one decision could be enough to make you a millionaire a few decades from now.
That’s how important this opportunity is. It could be enough to secure your entire future.
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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Nelson Smith owns shares of ENBRIDGE INC. The Motley Fool owns shares of and recommends Enbridge.