Year 2020 is emerging to be worst year for investors since 2008, the Covid-19 Coronavirus has badly hit the stock market. Stock market corrections are normal and there is no need to panic but this time the correction in market is something which can’t be ignore, same is because of worldwide virus threat to humanity and has created a situation like recession all over the world.
Let’s answer the first question coming to your mind…
What is a stock Market Correction?
Stock Market correction is fall in market Index (NIFTY and SENSEX) of at least 10% from its record high which might be due to market trend, economic relief package, market and investor sentiments, Government policy change etc.
When market goes up that is a festive time for traders and investors but when it goes down it carries away part of your principle investment too and creates a panic as investors watch their shrinking portfolios. The corrections make your mind filled with negativity and uncomfortable but same is only a temporary phase and markets again rises to return to normal levels.
So, you all would be thinking can we predict Stock Market Correction?
Predicting a Stock Market Correction
Well, it is not possible to predict a stock market correction as same is connected to various socio-economic factors that we have discussed earlier.
Still you can try to analyze and predict market corrections through Chart analysis, Algo and following the technical patterns of Index, still it is not easy to predict the exact point of time for market corrections.
We only get to know the causes of Stock market corrections after it really happens as there are so many factors affecting the stock market corrections.
Effect of Stock Market Correction on Long term investors
Well, for long term investors the stock market correction do not have much of an impact, you may feel a bump but the longer you keep invested in good quality stocks the better returns you will tend to get.
Some of the long term investor even see this as an excellent opportunity to reaccess their portfolio and make investments.
Still its always preferred to periodically review you investments and if there is a significant fall in a particular stock/ commodity its always better to book some loss and invest in quality stock to avoid further depreciation of capital, and if in a particular stock your target is hit then it’s the best time to book profit and move to next investment plan.
When there is market correction is it a good time to invest?
The reduction in stock prices gives you an excellent opportunity to add investment in high quality companies, you can use this time to buy stock that were otherwise been too expensive.
History suggests that investors can drive maximum profit when invested during a stock market correction. You don’t need to rub a lamp and ask when Stock market correction will happen, you just have to set a target and market do chance of investment to everyone just wait for the correct time for it.
Top picks for investment
If you want to build a diversified portfolio, then dividend and value stocks tend to perform best during slowdown/correction, as they generally fed lower and slower than growth stocks. Stock market correction is an excellent time to seek out the best value stocks, and you’ll want to look for ones with a history of strong earnings and solid balance sheets.
Don’t Panic About a Stock Market Correction: They come and go and won’t last too long