by Ben Carlson, A Wealth of Common Sense
Things are starting to get interesting in the markets. Over the past couple of weeks there’s been a constant barrage of bad news coming out about Greece, China and Puerto Rico. Then yesterday the New York Stock Exchange decided to have a “technical glitch” and shut down for a few hours.
Regardless of whether this stuff is just noise or actually ends up moving the markets, eventually the stock market will crack and have a correction. Maybe this confluence of events will be the trigger. Maybe it’s just another blip on the wall of worry. Eventually people will stop buying the dip and the complacency everyone’s been worried about for 2-3 years will cause a 10% or 15% correction.
Regardless of when it happens or why, here’s a list of who would benefit the most from a stock market sell-off:
- Anyone with a time horizon that extends beyond a few months.
- Anyone that will be a net saver in the coming years.
- Millennials, who should get on their hands and knees and pray for a correction so they can buy stocks at lower prices, higher dividend yields and lower valuations.
- Actually, this applies to anyone who is interested in buying stocks at lower prices.
- Jesse Felder’s razor blade.
- Everyone who’s been calling for a “healthy” correction.
- Everyone who’s been saying we’re “due” for a pullback.
- Everyone who’s been saying volatility is a “second half story.”
- The financial media and blogs (traffic tends to increase when markets sell off).
- The doom and gloom crowd who will surely take a few victory laps, maybe book a speaking gig or two and make as many appearances on CNBC as they can (of course, they’ll never actually buy back into the market after it falls).
- That co-worker of yours who told you in 2012 that they were going to wait for a 10% correction until they put their 401(k) contributions back into the market.
- Everyone who works in the graphics department of the financial news stations and knows how to spell the word “CRISIS.”
- Paper traders, who will brag about how they called the top of the market.
- Anyone who is currently holding cash or bonds in their portfolio and has the requisite intestinal fortitude to buy stocks when no one else is willing or able.
The fact that there have been two market crashes since the year 2000 has caused many investors to automatically assume that anytime the stock market goes down it must be a painful, gut-wrenching experience. Rarely do you hear people discuss the virtues of a good stock market correction. It’s a shame that people associate down markets with calamity and heartache, as opposed to opportunity and good fortune.
Everyone invested in stocks loses money in a correction. For some, it’s temporary. For others, it’s permanent. Stock market corrections are where successful investors make money and unsuccessful investors make mistakes.
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