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Why investing money in the best shares at cheap prices can help you to make $1 million

Investor with palm up and graphic illustration of asx shares charts shooting from his hand
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The stock market crash has caused some of the best shares around to trade at cheap prices. This could present a buying opportunity for long-term investors. Solid businesses may offer less risk and higher growth potential than their peers. Buying them at low prices may provide greater scope for capital growth.

While they may experience further volatility in the near term, over the long run they could boost your portfolio’s returns. They could even help you to make $1 million.

Buying the best shares currently available

Focusing your capital on the best shares you can find may improve your financial prospects. They are likely to include those companies that have a clear competitive advantage versus their peers. This may mean they can adapt to changing operating conditions, as well as survive a weak economic period better than most companies in the same industry.

Over the long run, holding solid businesses in your portfolio can reduce your overall risk and improve returns. They may be able to rely on stronger finances to support investment in growth. Similarly, they may use a wide economic moat to deliver higher profit growth that translates into a rising share price. As such, identifying the most attractive businesses in a specific sector through analysing their finances and market position could be a worthwhile move.

Cheap prices following the stock market crash

Although some of the best shares have rebounded after the stock market crash, many attractive businesses continue to trade at cheap prices. This may be because they face uncertain trading outlooks in the near term that have caused investors to demand a wider margin of safety.

As with any asset, buying at a lower price is more advantageous than purchasing it when it is more expensive. Today’s cheap stocks may not produce rapid returns to match their previous record highs. However, as the world economy’s outlook improves, they are likely to experience more robust trading conditions that lifts their profitability. This may lead to capital returns for investors who purchase them today while they offer wide margins of safety.

Making a million

Investing in the best shares today may improve your prospects of making a million. The stock market’s 8% long-term annual return would turn a $100,000 investment today into $1m over a 30-year time period. However, you could reduce the amount of time it takes to build a seven-figure portfolio by focusing your capital on a range of high-quality businesses while they trade at low prices.

History suggests that stock prices will move higher in the coming years as the economic outlook improves. Therefore, now may be the right time to capitalise on low valuations to improve your financial outlook.

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

*Returns as of June 30th

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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