A stock market crash is nobody’s idea of a good time. Watching a portfolio shrink in value is genuinely painful, especially for newer investors experiencing volatility for the first time.
But here’s what the experts know: a crash isn’t the time to panic. In fact, it’s the time to buy. And with the right approach, an average everyday investor could even retire a full decade earlier than planned. Here’s how.
Why crashes create life-changing opportunities
Investors who bought during the 2008 financial crisis, the 2020 pandemic crash, and the 2022 correction went on to earn extraordinary gains as prices recovered and then surpassed previous highs while dividends steadily followed.
The maths of why this matters are compelling. An investor putting aside £500 a month and earning the stock market’s long-run average of 8% a year would accumulate around £1.1m after 35 years.
However, an investor who capitalises on crash-induced bargains and secures superior long-term gains can drastically shorten this journey. In fact, with just a 13% annualised return, that same £1.1m threshold can be reached in just 25 years instead.
Obviously, securing consistently higher returns is easier said than done. But the evidence clearly shows that buying quality businesses at temporarily depressed prices is one of the most reliable ways to target exactly that.
Which shares should investors be watching?
While it’s impossible to know when the next crash will occur, the likelihood of a market meltdown eventually hitting investors’ portfolios over the next three decades is almost a certainty.
The key to success is to begin identifying the top-notch businesses ahead of time. That way, when everyone else is panicking, you’ve already got a strategy ready to execute.
So what are the quality stocks that investors should be watching right now?
There are quite a few candidates out there but right now, Rolls-Royce (LSE:RR.) has my attention.
Buying at a better price
The transformation at Rolls-Royce over the last three years has been remarkable. In its latest trading update, CEO Tufan Erginbilgiç reaffirmed full-year guidance of £4.0bn-£4.2bn in underlying operating profit and £3.6bn-£3.8bn in free cash flow for 2026.
Those figures are massively ahead of levels achieved in 2023. And it isn’t so surprising given that Civil Aerospace engine flying hours are running at 115% of 2019 levels, original equipment Defence deliveries are up over 20% year on year, and Power Systems booked a record order month in March with its backlog swelling to £7.3bn.
Obviously, this doesn’t mean Rolls-Royce will continue to thrive in the decades to come. Supply chain disruptions, natural shifts in flying hours, and rising competition within the modern nuclear sector all pose genuine threats to the firm’s market position and pricing power.
However, given the quality of leadership, these risks feel like they might be worth taking. The only problem is the share price.
Having climbed just shy of 1,150% in five years, Rolls-Royce shares are now trading at a premium valuation of 33 times forward earnings. That suggests a significant amount of future growth appears to already be priced in.
But if a better entry price – the kind a stock market correction tends to provide – were to emerge, Rolls-Royce shares could look far more tempting as a potential long-term investment for my portfolio.
Should you invest £5,000 in Rolls-Royce Plc right now?
When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.
And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Rolls-Royce Plc made the list?
Zaven Boyrazian does not hold any positions in the companies mentioned.
