The recent US-North Korea standoff and the negative global cues have pulled the market down considerably. If the tension between the two countries stands unresolved or escalates further the global markets may sink further low. Naturally, these developments have left the investors worried. When the market corrects on such a high volume, it leaves a dent on your portfolio. Especially if you are an Intraday trader, it hurts all the more.
But then this is not the first time the correction has happened, nor will it be the last. Then why people create such hue and cry about it? Or shall we ask, is there any plan to counter it? Some say buy on low and sell on top while some say hold it long so you won't feel the brunt. That's all true, but in reality, very few people manage to time the market. However, it is absolutely true that if you have a long-term investment perspective, you don't have to care about the minor hiccups. On top of that, there's another way to lessen the degree of damage caused by a correction or a market crash, for that matter.
Market Correction An Opportunity
Instead of trying to time the market or to worry about the movements of the market, the best way to emerge a winner from the market correction is to take the buying opportunities it offers. Yes, it offers a lot of lucrative buying opportunities. In the event of market correction or collapse, all the securities correct their value and come in the buying range. The expert investors, who watch the movements of the stock's, know exactly what stock to buy in what price range. Hence, these investors look forward to corrections. But, it will pay rich dividends if the retail investors can follow the footsteps of the professional investors and benefit from the market downturns.
Stock Market Corrections Only Matter If You're A Short-term Investor or A Trader
Another significant point you ought to realise is that stock market corrections really aren't an issue if you are focused on the long-term investment perspective. Only those people should be concerned when corrections roll around those who are trading with short-term goals or those who have heavily leveraged their trading with the use of margin.
Traders using margin could see their losses intensified in the phase of correction just like their gains get pumped up during the bull market. Active intraday-traders could see their losses and trading costs build during a correction. However, if you are maintaining a long-term view, the smartest way to invest in stocks, you can easily sail through the correction unhurt.
But Why? Why Do Corrections Happen In The First Place?
When the market is bullish, the prices of all the stocks rise. In such events, even the stocks which have less intrinsic value gets inflated and become overvalued. Thus, when the market corrects all such stocks come back into their value bracket. The market corrections happen on the regular basis, however, they don't last very long. If the global cues and buying sentiment of the investors is positive, markets recover in no time.
Long-Term Investors Have Nothing To Worry
One of the best ways to safeguard your investment is to have a long-term investment perspective. Going long sets you free from monitoring your investment portfolio on day to day basis. As you have invested only in good stocks with strong fundamentals, you are looking for long-term gains (read 10-15 years). As you have set a long-term goal, you tend to disregard periodical turbulences that every stock goes through. The quality of good stocks is that, despite corrections or even market collapse, they make up for the lost time on the basis of strong business and vision for the future. So if you want to make your investment hassle-free, it will serve you best to go long.
Finding good stocks takes a lot of efforts. All the financial details of the company have to be checked and verified before taking the ‘buy’ call. For the working professionals, it is next to impossible to give so much time to research and analysis. For such investors, subscribing to a stock advisory firm is the best option. It saves time and provides the best advice for your investment.