Buying stocks after a market crash may sound like a risky strategy for anyone who is seeking to build a portfolio valued at over a million. It could produce paper losses in the short run due to the unpredictability still present across the stock market.

However, a market downturn provides investors with the opportunity to buy stocks at lower prices. It may also strengthen the competitive positions of dominant businesses in a range of industries, and allow them to generate high returns in the coming years.

As such, investing in the stock market today could increase your chances of making a million in the long run.

Buying after a market crash

Many investors adopt a strategy where they aim to buy stocks when they are priced at low levels. They then seek to hold them until such a time that they trade at a much higher price.

The main problem with that strategy is that the periods when stock prices are at their lowest have historically coincided with economic downturns. At such times, risks facing investors are at their highest.

For example, the most recent notable market crash prior to that experienced in 2020 occurred in 2008/09. At that time, a great number of companies traded at prices that had not been seen for many years.

Following the market crash, a large proportion of them delivered successful stock price recoveries. However, many investors did not buy stocks when they traded at low prices due to the short-term risks they faced. This meant that they were unable to access the wide margins of safety that were on offer for a limited time, with their returns in the following years likely to have suffered as a result.

Although at the present time there are significant risks facing investors over the short run, in the long term the stock market is likely to recover. Therefore, buying a diverse range of companies during the current market could allow investors to fulfil the first part of their ‘buy low/sell high’ strategy.

Industry positions

The recent market crash could also cause stronger companies within a specific industry to improve upon their competitive positions. For example, those businesses that are better equipped to survive a prolonged economic downturn may gain market share. This may allow them to generate higher returns in the coming years.

As such, investors who can not only purchase cheap stocks, but also the highest-quality companies in an industry, may improve their chances of generating high returns in the coming years.

The market crash may highlight weaknesses in companies that had previously been overlooked by investors, such as high debt levels and inefficient business models. Investors may now focus their capital on the strongest companies within a sector that offer the most appealing risk/reward ratios. This could boost their returns over the long run.

Millionaire potential

Risks may continue to be present over the coming months across the stock market. However, buying high-quality businesses with dominant market positions while they trade at lower prices could be a sound strategy. It may boost your portfolio’s returns and increase your chances of making a million over the coming years.

More reading

• ASX beware: RBA warns on bank loan deferrals
• Top brokers name 3 ASX shares to buy next week
• Top brokers name 3 ASX shares to sell next week
• Invest $50 per day in ASX shares to generate a $50,000 passive income
• 3 great ASX dividend shares 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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We are nearly into FY21. I think there are some great ASX dividend shares which could generate attractive capital growth and pay good dividends over the next 12 months and the long-term.

I think it can be dangerous to just invest for a dividend yield. I believe we need to go for dividend shares that have the ability to generate a good stream of dividends as well as grow earnings (and eventually the share price).

Here are some dividend ideas for FY21:

Dividend share 1: Duxton Water Ltd (ASX: D2O)

Duxton Water is a company which purely owns water entitlements and leases them to agricultural businesses.

Water is obviously an integral part of the farming process. Farmers need access to water entitlements unless it’s a relatively wet year.

The last few years in Australia have been quite dry, which is partly why water values have been pushed up so much.

However, Duxton Water also points to the ongoing maturity of permanent plantings which are causing greater water demand. High value crops such as almonds and citrus are two areas where water demand is very high.

The ASX dividend share’s board is committed to pay bi-annual dividends. It intends to increase its dividend every six months. It wants to pay a dividend of 2.9 cents per share in September 2020 and by March 2022 it wants to pay a 3.2 cents per share dividend.

However, be aware that a wetter year can reduce water values. Also, the ACCC is going to release a report in July 2020 about the water system. The release of the report may prove to be a buying opportunity.

Duxton Water has an estimated forward grossed-up dividend yield of 6.2%.

Dividend share 2: Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)

If you regularly read my articles you’ll know that Soul Patts is an ASX dividend share favourite of mine.

I think the investment conglomerate could have a solid next 12 months.

The merger between TPG Telecom Ltd (ASX: TPM) and Vodafone Australia is about to go ahead. TPG is Soul Patts’ biggest position, so what happens with TPG is important. Since 1 May 2020 the TPG share price has gone up 26%. I think TPG could generate even more returns for Soul Patts from the upcoming special dividend, higher regular dividends and plenty of cost and revenue merger benefits.

I think another of Soul Patts’ holdings has an exciting 12 months ahead. The Brickworks Limited (ASX: BKW) share price is down 24% since the start of the COVID-19 selloff. Its underlying non-construction assets look as solid as ever. I believe at some point demand for building products will start to return, perhaps as early as FY21. I expect the share price will reflect the optimism sooner than the earnings.

Soul Patts has grown its dividend every year since 2000. I think the ASX dividend share can keep growing its dividend annually for a long time to come.

It currently offers a grossed-up dividend yield of 4.3%.

Dividend share 3: APA Group (ASX: APA)

This ASX dividend share is my preferred infrastructure play. I do think Sydney Airport Holdings Pty Ltd (ASX: SYD) is an interesting idea at this low price, but the income portion of the FY21 returns is very unclear at the moment, so I’m not sure I can pick it yet as a ‘dividend’ idea.

APA owns a vast network of 15,000km of natural gas pipelines around Australia with a presence in every mainland state and the Northern Territory. It also owns or has interests in gas storage facilities, gas-fired power stations and renewable energy generation (wind and solar farms). APA owns, or manages and operates, a portfolio of assets worth more than $21 billion and delivers half the nation’s natural gas usage.

The energy infrastructure giant generates reliable cashflow each year, which allows it to fund the ever-increasing distribution. It has grown its distribution every year for the past decade and a half. It currently has a FY20 distribution yield of 4.4%.

Foolish takeaway

Each of these ASX dividend shares have solid income potential over the next 12 months. I think the share prices can rise too. At the current value I’d go for Soul Patts, I think its exposure to TPG will be very useful as the telco profits from the merger.

More reading

• 4 top ASX dividend shares you should never sell
• How I’d build a $100,000 portfolio for ASX dividend shares
• Australian businesses are running out of cash
• Bapcor and 1 other quality ASX share to add to your portfolio
• Is the share market facing another February 2020 moment?

Motley Fool contributor Tristan Harrison owns shares of DUXTON FPO and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of APA Group. The Motley Fool Australia has recommended DUXTON 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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Inflation is not a term we hear much of these days. Well, in terms of its current impact. In fact, with the economy still in a coronavirus-induced shock and interest rates at a record low of 0.25%, it’s fair to say that the powers that be are more worried about deflation (or negative inflation) right now.

But there are signs that some investors are preparing for a return of inflation to the world of investing. Just last weekend, I wrote about how the ultra-rich are hoarding gold whilst other investors are enjoying the resurging share market. Gold is often touted for its supposed ‘inflation-proof’ nature, which is one of the reasons the rich are finding the yellow metal alluring.

What is inflation and why is it bad?

Inflation is defined by the slow-but-steady increasing of prices, or conversely, the weakening of a currencies’ value over time. It’s the reason why a loaf of bread cost 10 cents 50 years’ ago, but $3 today. Inflation is one of the greatest fears of an investor — and for good reason. In periods of high inflation (like in the 1970s–80s), the ‘real’ value of our hard-earned dollars declines, fast. That means that any cash lying dormant isn’t earning an inflation-beating return is losing real purchasing power. If inflation is 6% per annum and you receive a return of 5% from an investment, your money is going backwards in real terms.

Of course,  a little inflation is generally accepted as good for the economy. It encourages spending and credit growth. That’s why the Reserve Bank of Australia (RBA)’s official inflation policy is to aim for an inflation ‘bandwidth’ of 2-3% per annum.

But too much inflation is destabilising. If prices rise by 6% PA, every ASX company will have to increase their good and services’ pricing by at least 6%. And that’s just to break even. They will also be under pressure to grow their wages and other costs to keep up as well.

Are we heading for inflation on the ASX?

Actions by central banks around the world to combat the coronavirus is the biggest reason many investors are fearing future inflation. Specifically, investors are worried about the controversial monetary policy procedure; ‘quantitative easing’ (or QE).

Quantitative easing involves the central bank creating liquidity (also called money printing) which it uses to buy government bonds. As most of us would know, printing money has historically been a surefire way to create inflation. According to the Australian Financial Review (AFR), the US Fed has increased the value of its balance sheet from US$4 trillion before the pandemic hit to around US$8 trillion today. It took the global financial crisis and 11 years afterwards to get to US$4 trillion. Now the US has doubled it in 3 months.

The US isn’t feeling the inflationary effects of this extraordinary cash injection now. But it might well do at some point down the road. I’m not an economist, but what the US is doing is dangerous in my opinion. Sure, all governments have to protect their economies from the coronavirus fallout. But nothing is free in this world, and I wouldn’t be too surprised if inflation rears its head once more in the coming years. And if the US is hit with inflation, you can be sure is effects will be felt on the ASX, too.

The best solution in my view? Buy good-quality ASX shares, of course!

More reading

• 3 great ASX dividend shares for FY21
• The best placed ASX stocks for the August reporting season
• 3 of the best blue chip ASX 200 shares to buy in July
• Where to invest $5,000 into ASX shares in July
• These ASX dividend shares will help you beat low interest rates

Motley Fool contributor Sebastian Bowen 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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The upcoming reporting season promises to be like no other. The COVID-19 pandemic will make this August profit results an even more unnerving time for ASX investors.

The prospects for shocking negative surprises are heightened this year as the ASX relaxed the rules around disclosure due to the coronavirus outbreak.

The move is well intended. The shutdowns to control the virus have cast a thick fog of war around the near-term outlook for many ASX companies.

Why this reporting season is different

But the unintended consequence is that it is now harder than ever for investors to tell which ASX stocks will disappoint as we head into reporting season.

More significantly, this makes the investing strategy for the August results season different from recent years. This time, the key to outperforming is more about avoiding earnings disasters than it is about picking ASX shares that can exceed market expectations.

In fact, just meeting consensus forecasts may be enough to keep a company’s share price ahead of the S&P/ASX 200 Index (Index:^AXJO).  

One standout ASX sector for August

While there are precious few safe harbours on the market when the reporting season kicks off in a little more than a month, a handful of ASX stocks that are well placed to weather what is likely to be a stormy profit season.

One group that I like are iron ore miners BHP Group Ltd (ASX: BHP), Rio Tinto Limited (ASX: RIO) and Fortescue Metals Group Limited (ASX: FMG).

Some believe the iron ore price is set to tumble when shipments of the commodity from Brazilian rival Vale SA recovers. That is true, but I think one shouldn’t overestimate the miner’s ability to ramp up output when the country’s COVID-19 rates are the second highest in the world.

Coupled with Brazil’s weak healthcare infrastructure, and you can see why I am not optimistic that the Latin American country can get on top of the coronavirus curve anytime soon.

Potential profit upgrade

What’s more, the iron ore spot price doesn’t need to rise anymore for the three stocks to be cheap. If the price of the steel making ingredient holds around current levels, the three ASX miners’ earnings before interest, tax, depreciation and amortisation (EBITDA) will need to be upgraded significantly.

Macquarie Group Ltd (ASX: MQG) estimates FMG’s EBITDA will increase by 67% in FY21, while Rio Tinto’s and BHP’s EBITDA will have to rise by 23% and 12%, respectively that year.

What gives me extra comfort is that their balance sheets are among the strongest on the market. There’s little risk they will need to do an emergency capital raise like so many others on the ASX.

Gold standard for the August reporting season

Another group that I am overweight on going into the reporting season are gold miners like Newcrest Mining Limited (ASX: NCM) and Evolution Mining Ltd (ASX: EVN).

Stocks in this sector have run hard this calendar year and some think are looking expensive. But I think the price of the precious metal is likely to break above previous record highs due to excessive global stimulus and record low interest rates that will persist for years.

Having said that, it’s a good idea to buy a few gold stocks as some miners may unexpectedly encounter production issues. The same goes for iron ore miners for that matter.

ASX stocks with promising outlooks

There are also a number of industrial stocks that I believe will hold up well in August. The Ansell Limited (ASX: ANN) share price is one thanks to strong global demand for personal protective equipment.

I also have high hopes for the Seven Group Holdings Ltd (ASX: SVW) share price. The conglomerate, which owns the country’s largest industrial equipment rental company, is a big beneficiary of the infrastructure construction boom. State and federal governments have promised to fast-track a number of key projects to stimulate the economic recovery.

Other possible ASX winners from the reporting season

Our home-grown investment bank Macquarie should be another that delivers the goods. Management’s long track record of under promising and over delivering is reassuring. The group has also been growing its recurring revenue business, while volatile markets should present opportunities for its traders.

Finally, I think it’s worthwhile putting supermarket stocks like Coles Group Ltd (ASX: COL) and Woolworths Group Ltd (ASX: WOW) in your shopping basket.

While the experts are still debating if we are experiencing the second wave of COVID-19 infections, the second wave of panic buying is already hitting the supermarkets (no thanks to Victoria!).

The only thing that I am worried about with Woolies is Big W. If there is a negative surprise from its results, it is more likely than not to come from its struggling department store.

More reading

• 3 of the best blue chip ASX 200 shares to buy in July
• These ASX dividend shares will help you beat low interest rates
• These were the best performing ASX 200 shares last week
• Safe ASX 200 dividend shares to buy today
• Wesfarmers and one more ASX share I’d buy in another market crash

Motley Fool contributor Brendon Lau owns shares of Ansell Ltd., BHP Billiton Limited, Macquarie Group Limited, Rio Tinto Ltd., Seven Group Holdings Limited, and Woolworths Limited. Connect with me on Twitter @brenlau.

The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Woolworths Limited. The Motley Fool Australia has recommended Ansell Ltd. 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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