A stock market crash is very likely later this year. The second wave of COVID-19 infections hit the economy hard. Some provinces entered lockdowns again. The economy already took a significant hit with the first wave, and the underlying economic troubles could spell even worse news with another market crash.
If you make the right moves to prepare yourself, the market crash could be an opportunity for you to make a lot of money. It will not be easy to attempt using the downturn to your advantage. It will likely be very difficult, but creating a clear plan could help you use the next market crash as an opportunity to become wealthier in the long run.
A market crash can be very bad
The market crash in February and March 2020 was not easy. It came seemingly out of nowhere, causing stocks to decline over 35% within a space of a few weeks. Some companies declined even further. Of course, every market crash hits the TSX hard. Unfortunately, the stock market might not make a rapid recovery like after the 2020 market crash.
We do not know the details of this next market crash. There is no clear indicator about exactly what will make it happen or how long it will last. But we do know that no matter how bad the stock market crash is, it will rebound again. That critical factor will be necessary for providing those who can make the right plan an opportunity to become wealthy.
Make a clear plan of action
Understanding that a market crash is going to be stressful is not nearly the same as experiencing it. When it happens, being ready to face the emotions that come with the market crash is crucial. If you are already prepared for the market crash and all it entails, you might not let the seemingly bleak picture cloud your judgment.
The best buying opportunities in the stock market come after a market crash. Investors who did not give into fear bought valuable stocks at low prices. To benefit from the next market crash, you need to learn to control the stress you might feel. Making a clear plan and sticking to it regardless of how you might feel can help you make the most of stock market opportunities.
Possible ways to benefit from the market crash
Suppose the next market crash comes. Some of the best stocks will also take hits with the rest of the market. You need to determine which stocks you need to add to your portfolio at a low price to benefit from the capital gains as the dust begins to settle.
Fortis (TSX:FTS)(NYSE:FTS) could be an excellent place for you to begin. It is a phenomenal stock market pick for any market situation. The non-cyclical stock can continue generating predictable and stable revenues regardless of a market crash due to the essential nature of its business.
Fortis provides natural gas and electricity utility services to customers across Canada, the U.S., and the Caribbean. No matter how bad the economy gets, it will continue generating revenues without fail. The stock’s valuation could still take a major hit, as it did in the previous market crash.
Purchasing the stock could allow you to benefit from its post-market-crash recovery. Until the stock recovers, you can keep growing your account balance through its virtually guaranteed dividends.
Suncor Energy (TSX:SU)(NYSE:SU) is a stock you can consider adding to your portfolio as a slightly contrarian bet. The oil and gas industry was already facing a challenging year due to the oil price crisis before the pandemic struck. The onset of COVID-19 worsened the decline for energy sector operators like Suncor.
The stock is already trading for a significant discount from its pre-pandemic prices. A market crash could send its share prices down further. However, a recovery in stock markets along with increasing demand for crude oil as international travel returns to normalcy after the pandemic could help it bounce back far stronger.
Warren Buffett has continued to remain invested in Suncor. He bought more shares of the company during a time when he was selling many of his shares in various companies. It is likely that he also anticipates Suncor to be a value investment for a market crash.
Before things start becoming better, they will get a lot worse during the next market crash. Creating a clear strategy and investing in the right stocks could help you come out as a much wealthier investor on the other side of the crash.
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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 Adam Othman has no position in any of the stocks mentioned. The Motley Fool recommends FORTIS INC.