Master The Skill to Be Unaffected by Market Correction
by Shruti Sharma - Jan 26, 20223 min read
Many people get scared off from the stock market when there’s a correction. After all, who wants to see their net worth go down? But if you have the ability to look further than a single day or week — say, an entire year — you’ll realize that corrections are just a normal part of investing in the markets. The term 'Market Correction' is something that people are afraid of but a correction is a good thing. Corrections happen after every bull run. You cannot expect the bull run to last forever, A correction is when the market returns to the normal prices. Not a decline in the value of their investment.
Understanding the correction
A correction is defined as a drop in the market of at least 10% over a two-month period. Market corrections are not to be confused with bear markets. A bear market is a decline in an overall market that lasts more than a two-month period and drops at least 20%. There are many reasons to dislike market corrections. Corrections hurt your emotions. This is a completely normal part of investing — similar to the changing seasons. Corrections are a good indication that the market is healthy and becoming more stable over time. Correction makes investing in stocks more affordable and creates opportunities for long term growth on close to zero risk. As long as you invest for the long term, you don't have to worry about corrections, even large ones.
How to deal with correction?
Corrections are necessary because they bring in stability to the market. One should not get disappointed with the decline in their portfolio value. Investors must remain confident as they are investing in right mutual funds and should not worry about temporary market declines if they invest in mutual funds for long term. With proper asset allocation and early investing, investors can reap maximum benefits which will help them achieve financial freedom. Correction or not, when you invest in mutual funds, it’s important to remember that they are subject to market risk, but it's not as though you should let that scare you off. Many different studies have findings; that market corrections do not make a huge dent in the long-term performance of mutual funds. It is notable that long term thinking is important so that you can benefit from any correction by investing at lower prices. Take advantage of market corrections by increasing your contributions. This allows you to buy low and accumulate wealth over time. The stock market typically rises over time because the companies on the index become more profitable over time as they grow their businesses.
Remember that investing is a marathon, not a sprint.
From market crashes to flat years, market corrections are a fact of life for any long-term investor. As smart investors, we understand that the occasional market correction will happen. We know that eventually the economy will recover and stocks will come roaring back. We also know this because our favourite mutual fund sip investing strategy helps protect us when the market hits a rough patch. Investing is a marathon, not a sprint, and the best way to succeed is to keep your head down and follow your discipline. So, what are you waiting for? Invest in mutual funds today, and live well tomorrow.