Stock Market Recovery: Why I’d Still Buy Shares Today to Make a Million

A plan to buy shares when they trade at cheap prices could make it easier to make a million in a long-term stock market recovery.

money cash dividends

Image source: Getty Images

Even though many stock prices have risen over recent months, a plan to buy shares could still be the best means of making a million.

A number of high-quality companies currently trade at low prices. This suggests they could have large scope for capital growth in the coming years.

Furthermore, the lack of reward potential available among other mainstream assets could mean that a portfolio of shares outperforms its peers.

The potential to buy shares at cheap prices

The uncertain economic outlook has caused many stocks to trade at cheap prices. The history of the stock market shows that a plan to buy shares while they offer wide margins of safety can be hugely profitable. It allows an investor to take advantage of market cycles, in terms of buying stocks at low prices and selling them at high prices.

Such a strategy has largely been popular because the stock market has a long track record of recovering from even its very worst declines. For example, indexes such as the FTSE 100 halved during the global financial crisis. However, within just a handful of years they recovered to post new record highs. Although this outcome cannot be guaranteed to take place for all shares after the 2020 stock market crash, a likely economic recovery could cause stock prices to surge in the coming years.

Relative appeal of shares

While now may be the right time to buy shares because of their low prices, other assets seem to lack investment appeal. For example, income-producing assets such as cash and bonds now offer disappointing returns because of low interest rates. Furthermore, the outlook for interest rates means that this situation may persist over the medium term, as policymakers favour an economic recovery ahead of maintaining low levels of inflation.

Similarly, assets such as gold and property could lack appeal at the present time. The precious metal trades close to a record high, which suggests there is limited scope for capital gains. House prices are also relatively high, which could signal a lack of capital growth potential in comparison to a portfolio of undervalued shares.

Making a million

Making a million through a strategy that seeks to buy shares at low prices could be successful in the long run. Even if an investor matches the high single-digit annual returns posted by the stock market in recent decades, a $100,000 investment today could be worth over a million within 30 years.

However, with a likely stock market rally ahead and low valuations on offer, making a million from buying shares right now could be a faster process. Such a strategy may lead to market-beating returns that allow a portfolio to grow at a fast pace – especially when compared to the performance of other mainstream 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 Investing

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

3 Canadian Growth Stocks I’d Buy Under $30

These under $30 Canadian growth stocks are well-positioned to capitalize on mega trends such as e-commerce, the electrification of vehicles,…

Read more »

Gas pipelines
Stocks for Beginners

3 Reasons to Buy Enbridge Stock Like There’s No Tomorrow

Enbridge (TSX:ENB) is a superb long-term option. Here's why you should buy Enbridge stock right now and hold it for…

Read more »

money cash dividends
Dividend Stocks

This 8.39% Dividend Stock Can Pay $100 Cash Every Month

Consider investing in this monthly dividend stock at current levels to lock in high-yielding monthly distributions to create a good…

Read more »

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

Why This Tech Stock Just Jumped 18%

This tech stock just saw shares surge after announcing it was being acquired, but more growth could still be in…

Read more »

Canadian flag
Investing

3 Top-Performing Canadian Stocks That Should Just Keep Winning

Given their healthy growth prospects and solid underlying businesses, the uptrend in these three top-performing Canadian stocks could continue.

Read more »

The sun sets behind a power source
Investing

3 Reasons to Buy Fortis Stock Like There’s No Tomorrow

As far as top dividend stocks are concerned, Fortis (TSX:FTS) remains a top option long-term investors should consider right now.

Read more »

growing plant shoots on stacked coins
Stocks for Beginners

1 Copper Stock to Buy as Copper Prices Shine

The price of copper continues to climb, and more copper production is on the way for this top stock up…

Read more »

TFSA (Tax free savings account) acronym on wooden cubes on the background of stacks of coins
Dividend Stocks

Here’s the Average TFSA Balance in 2024

The Bank of Montreal (TSX:BMO) says that the average TFSA balance is $41,510, far below the maximum.

Read more »