While some shares have fully recovered from the 2020 market crash, many others continue to trade at relatively low levels. As such, there are still likely to be buying opportunities for long-term investors who are seeking to grow the size of their portfolio.

Through purchasing undervalued shares now, you could benefit from their long-term recovery potential as the prospects for the world economy improve. This may lead to market-beating returns that improve your chances of making a million.

Low valuations after the market crash

Numerous stocks continue to trade at low prices after the market crash. In fact, vast swathes of the stock market are currently trading significantly lower year-to-date, with their uncertain financial prospects causing investor sentiment to remain weak. For example, commodity-related stocks, banks and many support services companies currently trade on valuations that have not been seen since the last major global recession in 2008/09.

Buying stocks at low prices has historically been a sound means to generate high returns in the long run. As with any asset, a lower price provides greater scope for capital growth. It also means there may be a wider margin of safety on offer. In some cases, such as where a company has a solid financial position and long-term growth potential, a low valuation may not be merited. This could reduce overall risks for investors when such companies are purchased as part of a diverse portfolio of shares.

Recovery potential

While some sectors may currently seem unlikely to recover from the 2020 market crash, history suggests that they will encounter improving operating conditions in the coming years. For example, at times it felt as though the world economy would never recover from the global financial crisis. However, through the use of an accommodative monetary policy, global GDP growth gradually recovered. This allowed companies trading in a wide range of sectors to produce rising profitability, which catalysed their share prices.

With policymakers having already sought to stimulate economic growth through fiscal and monetary policy stimulus in many of the world’s major economies, the long-term prospects for global growth could be relatively sound. As such, buying a range of cheap stocks now while other investors are bearish on their prospects may enable you to benefit from a likely recovery in their prospects in the coming years.

Making a million

While the market crash may have temporarily derailed the performance of the stock market, its track record suggests that it offers high return potential in the long run. For example, indexes such as the FTSE 100 and S&P 500 have produced high single-digit annual returns over recent decades.

Assuming an 8% return on a $500 monthly investment, you could obtain a seven-figure portfolio within 35 years. However, through buying undervalued shares now ahead of a likely global economic recovery, you may be able to generate even higher returns than those of the stock market. This could improve your chances of making a million in the coming years.

More reading

• Where I’d invest $10,000 right now in ASX shares
• Top brokers name 3 ASX shares to buy next week
• Will the RBA keep the cash rate on hold for 3 more years?
• Top brokers name 3 ASX shares to sell next week
• ASX reporting season heroes to buy for FY21

Motley Fool contributor Peter Stephens has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Last week saw a large number of broker notes hitting the wires once again. Three buy ratings that caught my eye are summarised below.

Here’s why brokers think investors ought to buy them next week:

Appen Ltd (ASX: APX)

According to a note out of the Macquarie equities desk, its analysts have retained their outperform rating and lifted the price target on this artificial intelligence services company’s shares to $43.00. Although Macquarie acknowledges that Appen’s first half performance was softer than the market expected, it still believes it will achieve its guidance in FY 2020. It also remains very positive on the future thanks to the increasing spending on artificial intelligence. I agree with Macquarie on Appen and feel it would be a great buy and hold option.

Aventus Group (ASX: AVN)

Analysts at UBS have upgraded this property company’s shares to a buy rating and lifted the price target on them to $2.50. According to the note, the broker was impressed with Aventus’ FY 2020 results and believes it demonstrates the strength of its large format retail assets. And while it acknowledges that no guidance was given for the year ahead, it remains positive on its outlook and expects its assets to benefit from changing consumer habits. I think UBS is spot on and would be a buyer of Aventus’ shares.

Bravura Solutions Ltd (ASX: BVS)

Another note out of Macquarie reveals that its analysts have retained their outperform rating but trimmed the price target on this financial technology company’s shares to $5.50. Although Bravura’s performance in FY 2021 looks set to be disrupted by the pandemic, the broker appears confident this is temporary and its long term prospects remain positive. In light of this, it feels it is worth sticking with the company. I agree with Macquarie and would buy and hold Bravura shares.

More reading

• These were the worst performing ASX 200 shares last week
• Brokers name 3 ASX shares to buy right now
• The Appen share price is down 9% today. Here’s why
• ASX shares are on track for new record highs. Here’s why…
• ASX 200 down 0.9%: Costa impresses, Harvey Norman profits grow, Appen downgraded

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Bravura Solutions Ltd. The Motley Fool Australia owns shares of Appen Ltd. The Motley Fool Australia has recommended AVENTUS RE UNIT. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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It’s that time again. On Tuesday the Reserve Bank of Australia will be meeting to discuss the cash rate.

According to the latest cash rate futures, the market is reasonably undecided and is pricing in a 56% probability of a rate cut to zero.

One leading economics team that isn’t expecting a cut is the one at Westpac Banking Corp (ASX: WBC). Its latest report reveals that it is expecting the cash rate to stay on hold at 0.25% once again.

The bank stated: “The RBA is expected to keep policy settings unchanged at its September meeting. The Bank is providing support to the economy through a range of stimulus policies and will continue to do so for the foreseeable future.”

“The key elements have been: 1) lowering the cash rate to 0.25%; 2) targeting the 3 year government bond rate at 0.25%; 3) market operations, as needed, to provide ample liquidity to the banking system; 4) a Term Funding Facility for the banking system providing 3 year funding at 0.25%; and 5) Setting the rate paid on Exchange Settlement balances at the RBA at 10bps,” it added.

However, Westpac doesn’t appear overly convinced that this is enough and suspects the central bank may be forced to do more in the future.

It explained: “Persistently poor economic outcomes – growth well below trend, high unemployment, and inflation below the bank’s 2–3% target – mean the RBA will need to maintain these policies for an extended period and may come under pressure to do more in the future. For now though the bank is of the view that monetary policy is doing “what it can”.”

When will rates go higher?

Unfortunately for savers and income investors, don’t hold your breath for a rate increase any time soon. In fact, it could be years before we see a hike, according to Westpac.

It notes that “the [Reserve] Bank is prepared to purchase three year bonds at 0.25%, indicating that the cash rate is expected to stay at 0.25% at least out to August 2023.”

In light of this, I would sooner be putting my money into Westpac shares rather than its bank accounts, or buying dividend stars such as Dicker Data Ltd (ASX: DDR) and Rural Funds Group (ASX: RFF) ahead of term deposits.

More reading

• 3 quality ASX shares to add to your retirement portfolio
• Attention all value investors – here’s one key ratio to help you value a company
• 5 top ASX dividend shares you should never sell
• Dicker Data share price surges following interim results
• Reinvest your Coles dividends in these top ASX shares

Motley Fool contributor James Mickleboro owns shares of Westpac Banking. The Motley Fool Australia owns shares of and has recommended Dicker Data Limited and RURALFUNDS STAPLED. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Once again, a large number of broker notes hit the wires last week. Some of these notes were positive and some were bearish.

Three sell ratings that caught my eye are summarised below. Here’s why top brokers think investors ought to sell these shares next week:

Fortescue Metals Group Limited (ASX: FMG)

According to a note out of Credit Suisse, its analysts have downgraded this iron ore producer’s shares to an underperform rating with an increased price target of $15.00. Although the broker was pleased with Fortescue’s performance in FY 2020 and its dividend was greater than expected, it isn’t enough to stop it from downgrading its shares. The broker believes its shares are expensive, especially given its belief that the iron ore price could be close to reaching a top. This could ultimately mean that its earnings will soon peak. The Fortescue share price was changing hands for $18.87 on Friday.

Galaxy Resources Limited (ASX: GXY)

A note out of the Macquarie equities desk reveals that its analysts have retained their underperform rating and 40 cents price target on this lithium miner’s shares. According to the note, the broker believes that an oversupply of lithium will keep prices lower for some time to come. This is likely to weigh heavily on its performance until there is a recovery in prices, potentially in FY 2023. The Galaxy share price closed the week at $1.20.

Zip Co Ltd (ASX: Z1P)

Analysts at UBS have retained their sell rating and $5.70 price target on this buy now pay later provider’s shares. This follows the release of an update on the performance of its soon to be acquired QuadPay business. While the broker appears pleased to have seen a return to growth in July for QuadPay, it isn’t enough for a change of rating. UBS has previously suggested that the risk/reward on offer with its shares was unfavourable following a rally in its share price. The Zip Co share price last traded at $8.88.

More reading

• 5 things to watch on the ASX 200 next week
• Brokers name 3 ASX shares to buy right now
• Why Appen, Link, LiveTiles, & Zip shares are dropping lower
• Zip share price plummets 8% despite strong FY 2020 result
• ASX 200 drops 0.7%, Zip rises 27.5%

James Mickleboro owns shares of Galaxy Resources Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Don’t let the August reporting season go to waste, fellow Fools. This bi-annual event is an opportunity to evaluate and adjust your ASX portfolio, and the nearly completed profit season has taught us plenty.

The 2.5% rise in the S&P/ASX 200 Index (Index:^AXJO) is hint enough that the results have been better than expected.

ASX stocks that have bested expectations during this period tend to continue to outperform over the next few months. There’s no reason to think this time will be any different and there’s two stocks that I believe have a bright outlook for FY21.

Big Wow from reporting season

The first is the Woolworths Group Ltd (ASX: WOW) share price, which is lagging behind its rival Coles Group Ltd (ASX: COL) share price.

Coles may have produced a slightly better profit figures for its supermarket business, but I think Woolies stole the show.

It’s not the performance of Woolworths supermarkets that caught my attention, but its embattled Big W department store.

Faster than expected turnaround

I had low expectations for the department store chain, which suffered from falling comps (sales growth from stores opened at least a year).

But Big W hit it out of the ball park with a 32% increase in comps for the June quarter. The store benefited from stuck at home consumers snapping up IT, education and entertainment products during COVID-19.

The big jump in sales may not be sustained but the result is boosting confidence in the turnaround of the group’s Achilles’ heel.

No one will call the Woolworth share price cheap. But with a much brighter FY21 outlook for Big W and ongoing tailwinds from the pandemic, I believe there’s more room for the stock to climb.

Low hanging fruit

Another stock well placed to outperform in the current financial year is the Costa Group Holdings Ltd (ASX: CGC) share price.

Shares in the fruit grower surged 11.8% to $3.31 on Friday after it posted its half year results. To be honest, the numbers weren’t that great for its local operations, which accounts for over 70% of group sales.

But investing in shares is all about the future and not the past, and the outlook for the rest of 2020 is looking sweet.

Bright outlook to support Costa’s share price

The group’s international business is going gangbusters as sales surged 43% to just under $120 million compared to the first six months of 2019.

Some analysts thought the international business could be the weak link for the group and this explains the re-rating on Friday.

The outlook for the local division is also improving thanks to more favourable weather. The drought lobbed around $15 million from group earnings in the Tomato and Berry categories. But crops have fully recovered in May.

This is one stock that is unlikely to be impacted by the COVID-19 uncertainty. And assuming the weather remains favourable, the stock is likely to remain well supported over next six months, if not longer.

More reading

• 5 things to watch on the ASX 200 next week
• 5 top ASX dividend shares you should never sell
• ASX 200 drops 0.9%, Costa reveals healthy result
• Is the Woolworths share price in the buy zone following its FY 2020 results?
• Why Coles is a top ASX dividend share for a post-COVID world

Motley Fool contributor Brendon Lau owns shares of Woolworths Limited. Connect with me on Twitter @brenlau.

The Motley Fool Australia owns shares of and has recommended COSTA GRP FPO. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Woolworths Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Many investors don’t think about investing more in super. It’s easy to just consider buying ASX shares within your taxable brokerage accounts. However, buying your favourite companies directly or indirectly through your retirement accounts can have some powerful benefits.

Investing more in super to lower your tax bill

The most obvious benefit about investing more in super is paying less tax. Using a simple tax calculator, an individual with $100,000 of taxable income would pay an estimated $24,497 in tax.

Let’s assume that this investor receives the 9.5% p.a. Superannuation Guarantee, or $9,500, from their employer. By maxing out their concessional contributions at $25,000 per annum, that investor would lower their taxable income by $15,500 to $84,500.

That means the FY20 tax bill would be lowered to $19,172, representing a 21.7% reduction. Those additional contributions to super will be taxed at 15%, but that could be much lower than the marginal tax rate paid on your income. Clearly, investing more in super can have some powerful advantages when it comes to tax time.

Generate stronger after-tax returns

The favourable tax treatment also happens within the portfolio. If you buy ASX shares like Afterpay Ltd (ASX: APT) within your super, any capital gains are taxed at the marginal level. For the super fund, that’s likely to be 15% compared to 19% to 45% if it was in your brokerage.

Here’s a quick example. Let’s say you want to buy a broad market index like Vanguard Australian Shares Index ETF (ASX: VAS). If you purchased 5 years ago, you’d be sitting on a tidy 16.0% gain before including dividends. However, you then need to realise that gain at some point by selling your units in that fund.

If you’re a high-income earner on $200,000 per annum, that means 50% of those capital gains will be taxed at 45%. However, by investing more in super, those gains will be taxed at just 15% for the super fund which represents more money in your pocket come retirement.

On top of that, accessing super after 60 as either a super income stream or lump sum could be tax-free. Of course, there are strict eligibility criteria around this sort of stuff and its best to check with a qualified professional beforehand.

Nevertheless, there are some tasty tax breaks on offer for those willing to invest more in super.

Foolish takeaway

Investing more in super is not for everyone. It’s important to make all investment decisions in the context of personal financial circumstances, goals, age and many more factors.

Super does have its drawbacks like regulatory risk and significant lock-up period. However, if it fits your strategy, super could be a useful tool for a good retirement.

More reading

• Why I’d buy Afterpay and other ASX tech shares at record highs
• Bulls versus bears – two experts face off on where share prices are going
• Brokers name 3 ASX shares to buy right now
• ASX 200 rises 0.2%, Afterpay reports FY20 result
• Afterpay reckons this 1 number shows its ‘moat’

Motley Fool contributor Ken Hall owns shares of Vanguard Australian Shares Index. The Motley Fool Australia owns shares of AFTERPAY T FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Last week the S&P/ASX 200 Index (ASX: XJO) was out of form and tumbled lower. The benchmark index lost 0.6% over the five days to end it at 6,073.8 points.

Earnings season may draw to a close on Monday, but that doesn’t mean there won’t be another busy week ahead.

Here are five things that I think investors should be watching next week:

ASX futures pointing lower.

The ASX 200 looks set to start the week as it finished it. According to the latest SPI futures, the benchmark index is poised to open the week a disappointing 40 points lower. This is despite Wall Street finishing the week strongly on Friday. The Dow Jones climbed 0.6%, the S&P 500 rose 0.8%, and the Nasdaq pushed 0.6% higher.

IOOF results and potential major acquisition.

The IOOF Holdings Limited (ASX: IFL) share price will be in focus on Monday when the financial services company announces its full year results. According to CommSec, the market is expecting a net profit after tax of $132.6 million. The company is also planning to announce a potential significant transaction. There is speculation the company could be interested in acquiring AMP Limited (ASX: AMP).

Reserve Bank meeting.

The Reserve Bank of Australia will be meeting on Tuesday to discuss the cash rate. According to the latest cash rate futures, the market is pricing in a 56% probability of a rate cut to zero. While this means a cut is possible, it appears unlikely. The Westpac Banking Corp (ASX: WBC) economic team expects the cash rate to stay on hold at 0.25%.

Fortescue to trade ex-dividend.

The Fortescue Metals Group Limited (ASX: FMG) share price is likely to tumble lower on Monday when its shares trade ex-dividend. The iron ore producer is paying shareholders a final fully franked $1.00 per share dividend. This equates to a 5.3% dividend yield, which could mean its shares fall by a similar margin.

Other shares trading ex-dividend.

Fortescue isn’t the only share trading ex-dividend next week. On Monday there’s Ansell Limited (ASX: ANN), on Tuesday there are Super Retail Group Ltd (ASX: SUN) and Woolworths Group Ltd (ASX: WOW), on Wednesday there is Medibank Private Ltd (ASX: MPL), on Thursday there is BHP Group Ltd (ASX: BHP), and on Friday there is Bravura Solutions Ltd (ASX: BVS).

More reading

• Is the Woolworths share price in the buy zone following its FY 2020 results?
• Why Coles is a top ASX dividend share for a post-COVID world
• ‘Ethical’ share investors sell too quickly after bad news
• ASX 200 jumps 0.7%: Afterpay reaches 9.9 million customers, Woolworths strong sales growth
• Why the IGO share price is outperforming the ASX 200 today

Motley Fool contributor James Mickleboro owns shares of Westpac Banking. The Motley Fool Australia owns shares of and has recommended Super Retail Group Limited. The Motley Fool Australia owns shares of Woolworths Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Fortunately for growth investors, the ASX is home to a good number of companies capable of growing their earnings at a strong rate over the next decade.

Perhaps the hardest thing for investors is deciding which growth shares to buy above others.

To help narrow things down for you, I have picked out three ASX growth shares I would buy right now:

Altium Limited (ASX: ALU)

The first growth share to look at is Altium. It is one of my favourite growth shares and one which I think could generate strong returns for investors over the next decade. This is due to its award-winning printed circuit board (PCB) design software which is benefiting from the Internet of Things (IoT) and Artificial Intelligence (AI) booms. In addition to this, supporting its growth are its other businesses such as the Octopart search engine for electronic and industrial parts and the NEXUS workflow solution.

Domino’s Pizza Enterprises Ltd (ASX: DMP)

I think this pizza chain operator would be a great growth shares to own. I’m a big fan of Domino’s due to the popularity of its pizzas and its ongoing expansion. And while this expansion is likely to be impacted by the coronavirus lockdowns, I expect its store rollouts to accelerate once conditions return to normal. At the end of FY 2020, Domino’s had a store network of 2,668 stores, but is aiming to grow this to 5,500 stores by 2033. If it delivers on this and continues delivering same store sales growth, the future will be very bright for the company.

Pushpay Holdings Ltd (ASX: PPH)

A final ASX growth share to buy is Pushpay. It is a fast-growing donor management system provider to the faith sector in the United States, Canada, Australia, and New Zealand. Pushpay has been growing very strongly in recent years thanks to increasing demand for its platform. In fact, demand has been so strong the company posted a ~1,500% increase in EBITDAF in FY 2020. Pleasingly, demand remains very strong and the company is expecting to double its EBITDAF in FY 2021. I expect more strong growth in the coming years thanks to its quality platform, recent acquisitions, and the shift to a cashless society.

More reading

• How to turn $20,000 into $350,000 in 10 years with ASX shares
• Domino’s share price gain of 17% in August a good slice of news for shareholders
• How to become rich by investing $1,000 into ASX shares
• 2 top ASX tech shares to buy in September
• Where to invest $5,000 into ASX shares immediately

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Altium. The Motley Fool Australia owns shares of and has recommended PUSHPAY FPO NZX. The Motley Fool Australia has recommended Domino’s Pizza Enterprises Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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I believe that one of the best ways to set yourself up for a comfortable retirement is by having a passive income stream that is both reliable and has the potential to grow over time.

In my opinion shares that pay dividends are the best way to achieve this in the current environment.

The good news is that the ASX is home to a number of quality companies that I believe could be great additions to a retirement portfolio.

Three that I like are listed below:

Collins Foods Ltd (ASX: CKF)

Collins Foods is a quick service restaurant operator with a large network of KFC restaurants in Australia and Europe. While the company still has a lot of room to grow in Australia, it is the European market that I believe will be the key driver of growth over the next decade. This is because the KFC brand is under-represented in Europe and has a significant runway for growth. In addition to this, the company’s plan to the roll out the Taco Bell brand across several Australian states should also support its earnings and dividend growth over the coming years.

Goodman Group (ASX: GMG)

Another ASX share to consider buying for a retirement portfolio is Goodman Group. This integrated commercial and industrial property group owns a high quality portfolio of assets across several countries and industries. Given that many of its assets have exposure to structural tailwinds such as ecommerce, I believe they will be in demand for a long time to come. In light of this, I believe it is well-placed to continue delivering strong rental income and distribution growth over the next decade and beyond.

Rural Funds Group (ASX: RFF)

Finally, I believe Rural Funds would be a great addition to a retirement portfolio. This is due to the quality of the agriculture-focused real estate property trust’s assets and their long term tenancy agreements. Another positive is that these agreements have built-in rental increases. I feel this has positioned the company to deliver on its target of growing its distribution by 4% per annum over the long term. 

More reading

• How to turn $20,000 into $350,000 in 10 years with ASX shares
• 5 top ASX dividend shares you should never sell
• 3 defensive ASX shares I’d buy for safety
• 2 quality ASX dividend shares to buy
• Why I would buy these blue chip ASX shares for the long term

Motley Fool contributor James Mickleboro owns shares of Collins Foods Limited. The Motley Fool Australia owns shares of and has recommended RURALFUNDS STAPLED. The Motley Fool Australia has recommended Collins Foods Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The potential for a second stock market crash is likely to remain in place over the coming months. It is currently unclear how the coronavirus pandemic will progress, while political risks such as Brexit and the US election could weigh on investor sentiment.

If a second crash does occur, it could be a buying opportunity for long-term investors, rather than a reason to panic. By following Warren Buffett’s advice and focusing on high-quality businesses that trade at low prices, you could add stocks to your portfolio that produce excellent returns in the coming years.

Buying stocks with wide economic moats

A second stock market crash could be prompted by a weak economic outlook. As such, following Warren Buffett’s lead and buying stocks with wide economic moats could be a sound move. An economic moat is essentially a competitive advantage that a business has over its rivals. For example, it could be a unique product, strong brand loyalty or a lower cost base that ultimately produces greater profitability in the long run.

Companies with wide economic moats may be better able to survive a period of difficult operating conditions. This may mean that they are less risky than their sector peers. They may also produce higher capital returns in the long run as their competitive advantage allows them to occupy an increasingly dominant position within their sector. This could enhance your portfolio’s returns, while reducing its risk of loss during a period of decline for the stock market.

Buying cheap shares in a stock market crash

A second stock market crash could provide buying opportunities for value investors such as Warren Buffett. Certainly, valuing companies can be tough in a period where the prospects for the economy mean that the financial performances of businesses could materially change versus the recent past. However, comparing the values of businesses to their peers may provide an indication as to whether they offer a wide margin of safety.

Although it can take time for cheap stocks to recover after a downturn, the past performance of equity markets shows that a recovery is very likely. After all, the stock market has always recovered from its previous downturns to produce new record highs. A similar outcome to future bear markets therefore seems likely.

Cash holdings

Warren Buffett holds a significant amount of cash at all times. This enables him to more easily capitalise on a stock market crash, since he has significant liquidity through which to take advantage of lower prices during a bear market.

With the outlook for the economy being uncertain, it may be a good idea for you to hold some of your portfolio in cash now, and also refrain from being fully invested in shares should a second market downturn occur. A future bear market may be prolonged, and could provide even more attractive opportunities further down the line. Therefore, by taking your time to pick and choose the most attractive investing opportunities, you may be able to build a stronger portfolio as a result of a second stock market crash.

More reading

• Attention all value investors – here’s one key ratio to help you value a company
• How to turn $20,000 into $350,000 in 10 years with ASX shares
• These were the best performing ASX 200 shares last week
• The Corporate Travel share price has nearly doubled in August
• 5 top ASX dividend shares you should never sell

Motley Fool contributor Peter Stephens has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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