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The thing with stock market crashes is that no one really knows when the next one is coming. But for most investors, this is not something to be afraid of.
Being prepared for a stock market crash is an important part of being a good investor. And it’s probably easier than you might think.
Incoming crashes?
Conflicts in the Middle East have caused stock prices to fluctuate this week. The situation is moving fast and the chance of something big happening suddenly is unlikely.
Oil and gas prices continue to rise due to supply concerns. And this could be worse in the event of an extended disruption – or even military action – in the Strait of Hormuz.
Equally though, there is a chance that the situation can resolve itself relatively quickly. If so, prices are likely to come back down and we can all go back to thinking about AI all day.
Predicting what happens next is very difficult at times like these. But what you have to do is try to build a portfolio that can – eventually – cope with any outcome.
Time on the market
Buying under a stock market crash is an outstanding long-term success strategy. Unfortunately, no one really knows when this happens until it’s too late.
Fortunately, however, profiting from declining stock prices does not depend on expiration. Investors can do very well whether they are early or late.
During the pandemic, the FTSE 100 down 30% per month. But even investors who buy from even worse period – just before the crash – they still managed to return 76% in six years.
Never forget the low miss, that’s 10% per year to hit the high. Therefore investors need not worry about finding the right time to take advantage of falling stock prices.
One to watch
One stock I have my eye on and may think about if it continues to move forward Bunzl (LSE:BNZL). The FTSE 100 distributor had a difficult 2025, with profits per share falling by 7.7% due to weak trading conditions in the US.
If political tensions worsen that situation, the company could face challenges again in its largest market. And that’s a risk anyone considering a stock should keep in mind.
However, the company has great long-term profitability. Its scale means it can get a wider product range to customers faster and more reliably than competitors – and that’s very important.
On top of this, the stock doesn’t look expensive – even at today’s prices. Despite the decline last year, the £579m in free cash flow represents an 8% return on a market value of £7.08bn.
Investment strategy
Being a good investor is not about predicting what the stock market will do next. That’s a good thing, because no one can do that in any reliable way.
However, about knowing what strength happen and you are ready to deal with it. And that’s something investors can do by preparing to buy stocks when prices are attractive.
Conflict in the Middle East could send stock prices down sharply. But when they do, investors don’t need to plan things correctly – or well – to get good returns.
