Why Stock Market Downfalls Are Actually A Buying Opportunity

Stock market crash... Isn't it the most dreaded term for any investor? Indeed it is. After all, seeing your portfolio bleed red is a sight no one wishes to ever see, right?

However, amidst all this chaos that we end up creating in our minds during market downfalls, thanks to the biased opinions or hearsays, we fail to understand where we go wrong. In the words of the great Warren Buffett, the most important quality for an investor is temperament, not intellect.

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So, for tackling adverse market phases like a correction or crash, it's all about acting with patience and prudence, instead of resorting to panic selling, which makes you sit on a pile of heavy losses. In fact, instead of facing losses, you can instead turn market downfalls into an opportunity to actually utilize them to your benefit! Wondering how it's possible?

Think of it this way. During the various forms of market downfall, whether as a market crash or a correction, the prices of stocks and NAVs of mutual funds are available at lower costs and valuations, right? That is exactly what makes it imperative to turn this market downfall into an opportunity to buy the stocks or invest in equity mutual funds at lucrative and low prices, hence giving you, the equity investor, an opportunity to make some good buy at dips.

Even in the words of Warren Buffet- Whether we are talking about socks or stocks, I like buying quality merchandise when it is marked down.

It makes sense too. Doesn't it? Buying something at lower valuations is what enables you to sell it at higher prices later on, hence fetching you profit. Similarly in the market, when you buy stocks at lower prices or invest in equity mutual funds at lower NAVs during market corrections, you enable yourself to reap the benefit of such downfalls and later earn capital gains by redeeming or selling when the market recovers, bounces back and turns bull.

Also Read: Things To Know Before Investing In Equities Now That Markets Are Soaring

And history has been a witness that the market has always recovered from crashes or corrections, the most recent example being the stock market crash of march 2020, wherein NIFTY 50 had crashed to almost the 7,500 mark. With the market currently hovering at a high mark like NIFTY50 at around 17,000, this in itself proves the point.

So, instead of giving in to the knee-jerk reaction to steep market downfalls through panic selling, do the opposite, i.e. buy. Even for SIP investors, instead of getting overwhelmed by the emotion of fear, just go ahead to continue your SIPs or even start SIPs during bearish phases, as this allows you to buy more units at lower NAVs, which translates into lower average investment cost. And when the market rebounds, it's these continued investments during market downturns that will help in creating a bigger corpus and even reach the set financial goals sooner than expected as per the investment horizon.

Also Read: Lifelong Money Lessons That COVID Lockdown Taught Us

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