How to deal with bear markets and stock market corrections

Julie Brownlee, Fsp Invest, 26 May. 2015

Tags: stock market, stock market corrections, bear markets, buying low, investing, dealing with stock market corrections,

One thing that tends to weigh heavily on investors’ minds is a bear market or correction in the stock market. What if one day the stock market starts to tank?

So what exactly is a bear market or a stock market correction? And what should you do when one strikes?

Read on to find out…

The ins and outs of bear markets and corrections

A correction or bear market is when the stock market declines by 20% or more.

Whilst the very thought of these taking place sends chills through most investors, they’re ideal buying opportunities for you.

You need to embrace one when it does happen, Alexander Green in Investment U explains. It will make you richer over the long-term.

If the stock market just ticked away, slowly edging higher, there would be more people with their money in the stock market. It would attract this due to its lower associated risk.

By taking on the risk of investing, the stock market compensates you for this by the potential returns you can make by staking your cash.

Stock market corrections let you buy low

If the market goes through a big correction or a bear market period, it’s important to buy fantastic stocks at bargain basement prices.

Yet this goes against what most investors do. They’re scared to buy.

But you should welcome a correction. Even if it means some of your stocks hit their trailing stop losses, corrections and bear markets provide you with fantastic buying opportunities.

The world’s greatest investors know the value of buying when the market is down. Greats like Warren Buffett, Benjamin Graham and John Templeton.

Don’t let you emotions get the better of you if the stock market corrects. Act rationally. By buying low, you’re giving yourself a better chance of more upside.

So there you have it. How to deal with bear markets and stock market corrections.

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