Lots of people would like to retire. For those that invest, one idea can be for a soaring stock market to boost the value of their portfolio and give them the financial means to do so.
But what happens when there is a downturn?
The FTSE 100 has hit an all-time high already this year (it has since fallen back somewhat) – but what about when the next stock market crash hits?
A crash can be a brilliant long-term buying opportunity
Nobody knows for sure when that may happen.
Sooner or later, there will be a crash – but while it could be tomorrow, it could still be years away.
So rather than using my time to try timing the market, my approach is to ignore the question of when and focus on what. In other words, when the next crash does come, will I be ready to act, with a shopping list of shares I would like to own for the long term if I can suddenly buy them at an attractive enough price?
After all, a crash can provide the opportunity to buy into brilliant businesses at bargain basement prices.
But such a window of opportunity can be short-lived, so preparation is key.
Want to retire early? Here’s how a crash can help!
That buying opportunity can mean that a share is much cheaper than it had been before. If the price is attractive, that could be helpful in terms of long-term capital gain potential.
But another interesting angle here is dividends.
Why? Dividend yield is a function of two things – the dividend per share a company pays but also what you paid for the share.
So, buying a share cheaper can offer a higher yield, even though the dividend per share is the same as for someone who pays more for it.
As an example, let’s use my holding in Card Factory (LSE: CARD). The share sells for pennies and has a 7.5% dividend yield.
That yield sounds attractive already – but actually, some investors are earning much much more!
Always keeping the long term in focus
The Card Factory share price is still in pennies.
But it was much lower after the 2020 stock market crash, when investors feared that lockdown would badly hurt retail sales.
Back in May 2020, for example, it stood at 29p. So someone who bought then and held would now have comfortably more than doubled their money.
But they would also now be earning a stonking dividend yield of around 17%.
Getting into the right shares at the right moment can transform the long-term returns, potentially giving someone the means to retire early.
The Janus approach
So, could Card Factory be one to watch in the next crash?
Successful investing involves looking firmly forward, though ideally with an eye on learning from experience – like the Roman deity Janus.
Card Factory has a large shop estate, well-known brand, and proven business model. It is profitable and could potentially use its scale to benefit from industry consolidation, as its acquisitions in recent years have demonstrated.
But falling high street usage and rampant stamp price inflation both pose risks to demand. Product cost inflation can be hard to pass onto customers looking for a cheap card to send.
Still, at the current price I see it as a share to consider.
Should you invest £5,000 in Card Factory Plc right now?
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And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Card Factory Plc made the list?
Christopher Ruane owns shares in Card Factory.
