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The thing with stock market crashes is nobody really knows when the next one is coming. But for most investors, this is nothing to be afraid of.
Being ready for a stock market crash is a vital part of being a good investor. And it’s probably easier than you might think.
Crash incoming?
Conflict in the Middle East has been making share prices volatile this week. The situation is moving fast and the chance of something major happening suddenly is impossible to rule out.
Oil and gas prices have been rising due to supply concerns. And this could get much worse in the event of an extended disruption – or even military action – in the Strait of Hormuz.
Equally though, there’s a chance the situation could resolve itself relatively quickly. In that case, prices are likely to come back down and we can all go back to thinking about AI all day.
Predicting what happens next is extremely difficult at times like these. But the thing to do is try and build a portfolio that can – eventually – cope with either outcome.
Timing the market
Buying at the bottom of a stock market crash is a recipe for outstanding long-term success. Unfortunately, nobody really knows when this is until it’s too late.
Fortunately though, profiting from falling share prices doesn’t depend on getting the timing dead on. Investors can do incredibly well even if they’re slightly early or slightly late.
During the pandemic, the FTSE 100 fell 30% in a month. But even investors who bought at the worst time – just before the crash – have still managed a 76% return in six years.
Never mind missing the bottom, that’s 10% a year for hitting the top. So investors don’t need to worry about getting the timing right to take advantage of falling share prices.
One to watch
One stock I’m watching and might consider if it falls further is Bunzl (LSE:BNZL). The FTSE 100 distributor had a difficult 2025, with earnings per share down 7.7% partly due to a weak trading environment in the US.
If geopolitical tensions make that situation worse, the company might again face challenges in its largest market. And that’s a risk anyone considering the stock has to keep in mind.
The firm though, has an big long-term advantage. Its scale means it can get a wider product range to customers faster and more reliably than competitors – and that’s extremely valuable.
On top of this, the stock doesn’t look expensive – even at today’s prices. Despite a decline last year, £579m in free cash flows represents an 8% return on a market value of £7.08bn.
Investing strategy
Being a good investor isn’t about forecasting what the stock market is going to do next. That’s a good thing, since pretty much nobody can actually do that in any kind of reliable way.
It is however, about knowing what might happen and being ready to deal with it. And that’s something investors can do by preparing to buy shares when prices become attractive.
The conflict in the Middle East might make share prices fall sharply. But if they do, investors don’t need to time things perfectly – or even well – to have a shot at some great returns.
