market correction Archives

A market correction can be frightening for many investors. But it can be a great buying opportunity if you’re prepared for it.

For both new and experienced investors, a market correction can be scary. It’s hard not to panic when you watch a major stock index drop 10% from a recent high. No doubt, it can be a rough experience. But if you invest in the stock market, you will eventually encounter a market correction. They happen. There’s no way around that fact. 

From July 2015 to February 2016, the S&P 500 tumbled 12.3%. The second half of 2011 was another rough patch for the market. Again, the slide began in July, and while it didn’t last as long as the 2015-16 slow-bleed, the losses were more pronounced; the S&P lost 16.5% of its value in one month! 

A similar market crash occurred in the spring of 2010. From the third week of April through the end of June, the S&P shed about 16%. Stocks didn’t really get going again until late August. There was another market correction in mid-2019. 

These corrections aren’t necessarily as bad as they seem. Usually, they are “correcting” an imbalance and putting stock prices back on their original trajectory. Value and long-term investors can generally wait a correction out; however, day traders and growth investors looking for quicker returns often panic.

Don’t panic. Rumors of a stock market correction might cause you to worry and sell your stocks, but that’s rarely the best thing to do.

Instead, prepare for a pullback in advance so that you’re positioned to buy low during the pullback, then reap capital gains as the market naturally recovers. Here are three tips for buying low in a stock market correction:

  1. Buy stocks with growing annual profits.
  2. Buy stocks that fell a little, while avoiding stocks that fell a lot.
  3. Buy stocks that have big dividend yields.

Although the coronavirus has come with terrible consequences, the market volatility brought on by the virus offers an opportunity to put some of these tips into action. You can explore further in our free report, What to do now? How to Invest During the Coronavirus Recovery. 

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