Investment experts say that buying after stock markets fall can give you an opportunity to make strong returns
Adam Mlamali bought his first home late last year in the West Midlands.
It was a fixer-upper, which the 23-year-old says needed extensive renovations, which have already begun, and have so far cost £20,000.
He decided he needed to find some money to complete the renovations, and so, in April, Adam paused the renovation work and decided to go “all in” on investing in stocks after Donald Trump sent markets plunging following his wide-ranging tariffs on imports from around the world.
The decision may seem strange to some, but Adam’s logic was that stocks would rebound, and he could profit when they did.
He first started investing with a stocks and shares ISA in 2020, when he was working in finance. At the time, stocks had plunged after the Covid lockdown begun, and Adam said it was “the perfect time” to put money into equities – stakes in companies.
Between late March 2020 and November 2021, the S&P 500, a stock market index tracking the performance of 500 leading companies in the United States, rose by more than 100 per cent, and this experience gave Adam the confidence to buy on the dip again.
“My thoughts were if we could go through a pandemic and come out with very strong highs, I thought longer term we’d be OK after the Trump tariffs,” he says.
“At the start of April, companies had fallen below their value, so I thought if I went for companies that I thought were undervalued, I’d make money in the longer term.”
Adam’s strategy has been diverse. He has invested some money in tracker funds – an investment that follows the performance of a group of stocks – but also bought shares in specific companies as well.
“I have taken risks on certain stocks – a lot of companies in the health sector, for example,” he says.
To give one specific example, he invested heavily in US medication company Hims & Hers. Between the end of April and early last week, the share price was up by well over 100 per cent.
“I’ve now sold my investment here to buy some companies that could have more stable returns,” he adds.
He has also invested in firms like Microsoft, which have risen significantly since their values dipped at the start of April.
Adam, who now works in tech and AI, says some of his experience investing has been built from working in finance previously, but a lot of it was personal experience.
In this period, he made around £60,000 from investments, a return of about 30 per cent since early April, but plans to keep his cash invested and return to the renovations when he has more money.
As well as his investments, he holds some cash – enough for three to six months of emergency funds – but admits that though he pays into a pension, he has never seen its value.
In terms of whether others could follow his lead, he says that while anyone could “actively invest” – buying and selling individual equities – if they took the time to learn, he does not think everyone should necessarily do so.
He believes tracker funds can be a halfway house for those who want to take a less active approach.
Investment experts say that buying stocks when prices are low can lead to gains, but it also comes with some risk.
“History suggests that stock markets will regularly move up and down, and that one of the best times to buy is when lots of people are selling,” says Dan Coatsworth, investment analyst at AJ Bell.
He adds: “Investing is about taking a long-term view, and so any stock market dip, such as the one we saw following the Liberation Day tariff announcement, is an opportunity to buy something at a cheaper price.
“At the time, it might have felt like a gamble to buy when there were so many uncertainties. In this situation, it’s all about taking a view that certain companies would get through a potentially difficult patch and come out the other end unscathed. For those who don’t like to buy individual shares, it would have meant taking the view that markets would eventually recover.”
Mr Coatsworth says that when there is a “wobble” in the market, it can pay to dip into cash reserves and go “bargain hunting.”
“Albeit accepting that fishing for opportunities doesn’t always catch you a whopper,” he adds.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said the platform saw many investors take similar approaches after the stock market dip in April.
She said: “The stock market turmoil kicked off a record surge in activity on the HL platform at the start of 7 April was the busiest day ever in terms of trades.
The sharp falls in valuations were seen as an opportunity to buy into the US market, despite significant market volatility. Nine of the top ten most bought funds in April were focused on the US or internationally, as investors saw it as a chance to top up their holdings at lower prices.”
But she gave a note of caution. “The US market still looks overvalued and as euphoria about the US-China deal wears off and wariness re-emerges about longer-term trading relationships, stocks may be back under pressure in the near term,” she said.
