Who Would Benefit From a Stock Market Correction?

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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  1. A little perspective is needed | Vestact's – Quirk with quark commented on Jul 10

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  3. Paul commented on Jul 13

    You forgot my old profession: the securities attorneys who make their money when disgruntled investors sue their financial institutions/ representatives.

    • Ben commented on Jul 13

      Ha. People are willing to believe almost anything so your old profession will always have clients.

      • Paul commented on Jul 13

        Absolutely, Ben! I stopped practicing to try and stem that wave of litigation with Contract Cloud. We’re using video and scripts. I would love to know what you think about our platform. My email is paul@contractcloudinc.com.

  4. Joel Monteiro commented on Jul 16

    Number 3 fits me like a glove. I know one shouldn’t time the market but it honestly looks too high to be true. I’m waiting for that correction to start investing.

    • Ben commented on Jul 16

      That’s good that you recognize this but also remember that you have decades ahead of you so try not to wait too long.

      • Joel Monteiro commented on Jul 16

        I’m currently reading The Intelligent Investor, by Benjamin Graham, and on chapter 3 he describes a similar scenario in 1964, where he advised against starting investing because the market was too high. I also read your entry on luck when entering and exiting the market, which also made me hold my money to see how the current all-time high score unfolds.