The Positive of Market Corrections… Consider it a Sale

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March 3, 2020 Market corrections are not easy. In a perfect world, the market would go up and up and we’d never have to worry about downturns. But with global fear of the coronavirus, a 2020 election, recession anxiety, and instability in the bond market, the market has entered a downturn reminiscent of the 2008 financial crisis. The Dow Jones Industrial Average fell 3,500 points during the week of February 24–28. That’s a steep drop by any measure.

Let’s face it: if you’re heading into retirement or already retired, corrections are downright scary and frustrating. Having a plan is key, especially in times like this. But if you have a long time horizon, now could be a great time to buy, because many high-quality companies are on sale. Take Apple as an example — iPhones, iWatches, iPads, and MacBook Pros dominate the technology in our daily lives. On January 29, 2020, Apple stock was trading at $327.85 per share. By the close on Thursday, February 27, it was at $262.00, a drop of roughly $65 in a month. That’s a discount — effectively, a sale.

It’s never easy to predict how far the market will fall, and Apple could continue lower, especially as coronavirus-related supply chain disruptions spread. But for long-term investors, treating corrections as a sale can pay off. Say Apple pulls back to $250 and you buy 100 shares. If over the next year it recovers to $327, you’ve made $77 per share, or $7,700 total. Not a bad deal.

Again, corrections are not easy. The one we’re living through can cause paralyzing fear and anxiety — the kind of fear that leads to devastating financial decisions. Times like these are exactly why a sound investment plan matters. A good plan helps you ride out the emotional roller coaster that comes with investing. It’s important to remember that, while corrections are painful, they are usually temporary, and markets have continued to rise over time. Just look at the history. If you need help, feel free to reach out — we can point you in the right direction. Thanks for reading. CFEFinances.com

Market corrections are never easy. With coronavirus, a 2020 election, recession fears, and a shaky bond market, the Dow just dropped 3,500 points in a single week. For investors with a long time horizon, though, a correction is really a sale. We explain how to think about it — and why a sound plan is your best defense.