A stock market crash could help investors retire early. Here’s how

Story by Zaven Boyrazian, CFA

Long-term vs short-term investing concept on a staircase© Provided by The Motley Fool

Whenever the stock market hits a rough patch, investors often start nervously eyeing their portfolios. After all, there’s nothing more unpleasant than seeing investments crash in value.

So capitalising on these can propel portfolios to new heights, potentially opening the door to an earlier retirement.

The power of a crash

Let’s take a trip down memory lane and explore the stock market at the height of the pandemic. When lockdowns were put in place, shares around the world tumbled. And here in the UK, even the FTSE 100, which has historically been quite resilient, dropped sharply by around 30% in March.

Yet those with their eye on the long term could have used this sudden drop to start snapping up shares at a massive discount. And even when relying on passive index funds, the results would have been tremendous.

The extra gains generated from investing during a volatile market environment have made a massive difference, even for investors following a strategy as simple as drip-feeding £500 into an index fund each month.

If you buy an index tracker and as long as you can choose when to sell, you will not lose any of your hard earned, it could be multi years though.

To buy when markets are week, you either need a safe part of your Snowball that you can sell, new funds to add to your Snowball, or dividends to re-invest at sale prices.

The Market is the only place where customers run out of the Store when there is a sale on.

WB