The FTSE 100 recently hit a new all-time high, prompting many investors to reflect on the value of buying into markets during periods of sharp decline.
While it may seem counterintuitive, a stock market crash can offer a rare opportunity to purchase strong shares at unusually low prices.
Investors who placed £20,000 into a Stocks and Shares ISA at the low point of the March 2020 crash face an interesting case study in long-term patience.
Using a FTSE 100 index tracker as the benchmark is a reasonable approach, since broad diversification limits the damage caused by any single underperforming stock.
During a crash, some shares fall for no good reason, while others decline because they were simply overpriced to begin with, making individual stock-picking particularly treacherous.
The FTSE 100 has risen 91% since the March 2020 low, meaning a £20,000 investment made at that point would now be worth approximately £38,200.
The index has also climbed 20% in the past year alone, a notably strong performance for a large-cap benchmark dominated by businesses in mature industries.
Beyond capital growth, dividends represent a significant additional source of return that investors should not overlook when assessing total performance.
The FTSE 100 currently yields around 3%, but someone who bought at crash-level prices in March 2020 would now be earning close to 6% yield on their original investment, roughly £1,200 per year in passive income.
Choosing the right index tracker also matters, since fees vary meaningfully between providers and can quietly erode long-term returns over time.
Henderson Far East Income (LSE: HFEL), a FTSE 250 investment trust, is one name that has attracted attention, currently yielding 9.8% after growing its dividend per share annually.
HFEL is actually 4% cheaper today than it was in March 2020, which could appeal to investors seeking income exposure at a modest valuation.
The trust carries meaningful exposure to Asian economies with strong growth prospects, including chipmakers across the Far East, which represents both a near-term risk and a long-term opportunity.
No dividend is ever guaranteed to last, but the trust’s managers have demonstrated a consistent ability to sustain high payouts over the medium to long term.
For investors hunting value today, the lesson from 2020 remains clear: knowing which shares to buy before a crash arrives is just as important as acting when one unfolds.