After decades of study, our research shows that the stock market actually does go up from time to time. In fact it has been happening since at least the 1930s, possibly earlier. We have yet to find an infinitely downward moving market, but we’re still looking.
Don’t Minimize The Long Term
Watching the news, there’s a tendency to lose sight of the big picture on your investments. For most of us, our investing strategy doesn’t have a time span of minutes, hours, days, or even weeks. It’s usually a much longer time horizon of years or decades for some. Which is easily overlooked when the market drops 500 or 1000 points in a day or two.
That college savings or retirement strategy, can quickly become a two second trade if cooler heads don’t prevail. Call it preservation, fear, panic or some primal survival instinct, a quick emotional decision could have an adverse effect on your investment goals.
In the long run you’re better off leaving things alone and sticking to the long term strategy. Which is the point of all this. When you see big down moves in the market, ask how it affects the big picture. Sometimes it’s best to sit back and let the market run its course.
It’s A Long Term Buying Opportunity
If you can predict the bottom then you can skip this and head over to your broker. In a perfect world I’d have that power too, but I don’t. I do know that history tells us you can improve your long term gains by buying stocks during major market corrections. This is one of those times.
For a conservative approach look for high quality dividend stocks. If your looking for more risk there has been a large number of high growth stocks that have been knocked down 15% or more. Look for stocks that just turned in a good to great quarterly earnings. About 70% of the S&P 500 stocks that have reported earnings, beat their quarterly estimates.
Use a scaling strategy. Want to buy 100 shares. Buy 25 now. If the stock moves 5% lower buy 25 more. Don’t go all in, there will be several opportunities to buy in the coming weeks.
Remember the market is like a spring, when you push it down, it eventually bounces back up.