How to Prepare Yourself for a Future Stock Market Correction
While a stock market crash is not the end of the world for investors, it interferes with earning potential. A severe market correction happens for a variety of reasons, whether for bad economic news, rampant speculation, rising interest rates, inflation, and a global pandemic. Indexes drop sharply for a day or more.
Investors panic and dump their stocks, thereby driving prices lower. Meanwhile, value investors with long-term views see declining markets as buying opportunities. Shares of good companies will trade below intrinsic or book values. They buy low and sell high at a future date to make substantial profits, even millions.
The stock market’s behaviour is unpredictable. It booms and contracts, depending on the economic environment. When equities trend downwards, investors take advantage and purchase stocks at deep discounts. Historically, the market consolidates and rebounds in the aftermath.
The buy-low and sell-high strategy is a creative and assertive maneuver. However, for investors looking for long-term financial success, one approach is worth adopting. Identify tried-and-true dividend-paying companies that continue to pay dividends to shareholders despite economic meltdowns or harsh recessions.
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