3 Reasons Why I’d Invest Money in Blue-Chip Shares at Today’s Prices

Buying blue-chip shares at today’s cheap prices could lead to relatively high returns over the long run in my opinion.

consider the options

Image source: Getty Images

Investing money in blue-chip shares after the stock market crash could be a profitable long-term move. In some cases, high-quality businesses are currently trading at prices that do not fully reflect their long-term growth potential.

Furthermore, the stock market has a long track record of recovery from downturns. Therefore, even if there is another market crash, the prospects for equities over the coming years could prove to be positive.

Meanwhile, a lack of return potential elsewhere may mean that stocks outperform other assets. This could make now the right time to build a diverse portfolio of shares.

Undervalued blue-chip shares

Many blue-chip shares currently face uncertain operating conditions that may persist for a number of months. However, in many cases those risks appear to have been priced in by investors. A wide range of stocks currently trade at prices that are significantly below their long-term averages. In some cases, today’s valuations have not been seen since the last bear market during the global financial crisis over a decade ago.

Buying undervalued shares can prove to be a sound move. It allows an investor to access a high-quality business at a low price that can provide scope for greater capital returns over the coming years. Certainly, cheap shares can become even less expensive in the short run. However, their long-term prospects may be much more positive than current valuations suggest.

Recovery potential after a stock market crash

Another reason to invest in blue-chip shares is their long-term recovery prospects. The stock market has experienced numerous corrections, bear markets and downturns in its long history. While they have been painful in the short term for many investors, indexes such as the S&P 500 and FTSE 100 have always recovered to post fresh highs in the following years.

At the present time, a stock market recovery may seem somewhat unlikely. Risks such as a weak economic outlook and coronavirus mean that investor sentiment may deteriorate in the short run. However, the stock market’s track record suggests that growth from its current level via a sustained bull market is likely to take place in the coming years.

Relative appeal of stocks

Blue-chip shares may face an uncertain near-term outlook. However, their long-term return prospects appear to be far more attractive than those of other mainstream assets.

For example, low interest rates mean that cash and bonds offer return prospects that are potentially lower than inflation. This could hurt an individual’s spending power over the long run. Meanwhile, high house prices and gold’s rise in 2020 may mean that there is better value for money in the stock market.

Through buying a diverse portfolio of blue-chip shares, an investor could profit from low prices and a likely long-term recovery. Therefore, now could be the right time to buy stocks, rather than other assets.

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.

More on Coronavirus

Aircraft wing plane
Coronavirus

Should You Buy Air Canada Stock While it’s Below $18?

Air Canada (TSX:AC) stock is below $18. Should you invest?

Read more »

Illustration of data, cloud computing and microchips
Stocks for Beginners

3 Canadian Stocks That Could Still Double in 2024

These three Canadians stocks have been huge winners already in 2024, but still have room to double again in the…

Read more »

Aircraft Mechanic checking jet engine of the airplane
Coronavirus

Can Air Canada Stock Recover in 2024?

Air Canada (TSX:AC) stock remains close to its COVID-19 era lows, even though its business has recovered.

Read more »

A airplane sits on a runway.
Coronavirus

3 Things to Know About Air Canada Stock Before You Buy

Air Canada stock continues to hover below $20 despite the sharp rise in travel demand seen across the industry. What's…

Read more »

tech and analysis
Stocks for Beginners

If You Invested $1,000 in WELL Health in 2019, Here is What It’s Worth Now

WELL stock (TSX:WELL) has fallen pretty dramatically from all-time highs, but what if you bought just before the rise? Should…

Read more »

Hand arranging wood block stacking as step stair with arrow up.
Coronavirus

2 Pandemic Stocks That Are Still Rising, and 1 Offering a Major Deal

There are some pandemic stocks that crashed and burned, while others have made a massive comeback. And this one stock…

Read more »

Dad and son having fun outdoor. Healthy living concept
Dividend Stocks

1 Growth Stock Down 15.8% to Buy Right Now

A growth stock is well-positioned to resume its upward momentum in 2024 following its strong financial results and business momentum.

Read more »

Double exposure of a businessman and stairs - Business Success Concept
Stocks for Beginners

3 Things About Couche-Tard Stock Every Smart Investor Knows

Couche-tard stock (TSX:ATD) may be up 30% this year, but look at the leadership and history of the stock to…

Read more »