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Forget gold and Bitcoin. I’d buy cheap stocks after the market crash to make a million

The stock market crash has provided numerous opportunities for investors to purchase cheap stocks. Despite this, some investors may feel that other assets such as gold and Bitcoin offer superior growth prospects. After all, they have risen sharply in price of late, and may have outperformed some stocks over recent months.

However, the track record of the stock market suggests that it offers long-term recovery potential. As such, and with gold and Bitcoin having their own risks, equities could prove to be a better means of making a million than other assets.

Cheap stocks: a buying opportunity

The stock market’s track record suggests that buying cheap stocks can be an effective means of making a million. It has always experienced periods of boom and bust, with neither of them lasting forever. Therefore, investors who can buy undervalued businesses during downturns can be among the biggest beneficiaries during the likely recovery.

At the present time, the continued risk of a second market crash means that many shares are trading on low valuations. In some cases, they are not wholly merited due to the financial strength and competitive advantage of businesses in sectors that have long-term growth potential. As such, there appear to be opportunities for investors to purchase bargain shares even after the stock market’s recent rebound from its decline in February/March.

Clearly, some cheap stocks are unlikely to survive the challenging outlook faced by the world economy. As such, it is imperative for investors to try and purchase the best quality companies they can find, and to diversify across numerous industries and regions. This may reduce your overall risks, and help to provide sustained growth for your portfolio.

Bitcoin and gold: an attractive risk/reward opportunity?

Of course, some investors may seek to avoid cheap stocks in favour of other assets such as Bitcoin and gold. While their prices may have risen sharply, they appear to offer less attractive risk/reward investing opportunities than a portfolio of equities.

For example, gold’s appeal could deteriorate in the coming years as investor sentiment gradually improves. Furthermore, it currently trades close to a record high, which may indicate that there is limited scope for a price rise over the coming years.

Similarly, Bitcoin may not be an attractive investment opportunity. Its limited size and ongoing regulatory risks could mean that its price level is overly generous. And, with the virtual currency lacking fundamentals, challenges in valuing it may mean that buying cheap stocks is a far more logical step for long-term investors.

Therefore, while further difficulties may be ahead for stock market investors, low price levels and the recovery potential of equities mean that now could be the right time to buy a diverse range of companies to make a million.

5 stocks under $5

We hear it over and over from investors, "I wish I had bought Altium or Afterpay when they were first recommended by The Motley Fool. I'd be sitting on a gold mine!" And it's true.

And while Altium and Afterpay have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $5 a share!

*Extreme Opportunities returns as of June 5th 2020

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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