Most folks I know get quite excited when the market is marching upwards — that’s when they ask the usual questions about what type of stock to get into or what fund is worth checking out. It’s the herd mentality at work, and when stocks are strong and market momentum is fierce, we can’t help but be swept in it. But what about those times when the market is in the dumps? If you’ve got the funds, entering the market during a correction or bearish period may yield you good value for your money, especially when you take the long view. Taking the contrarian approach can yield you bigger returns down the road since big downtrends are usually followed by even bigger rallies.
When all you hear is bad news.
As they say, buy when there’s blood on the streets. This is simply a corollary to the “rule” that states that you should consider buying when the market is down. I get particularly excited when people are selling and bad news is circulating everywhere, thereby exerting downward pressure on the markets. So contrary to what you may think, bad news is really good news….for buyers and investors!
When you stumble unto a windfall.
Okay so how many of us can admit to spending a windfall before we actually ever receive it? Have you tried mentally accounting for a windfall, and assigning it to an expense bucket before you’ve even gotten a chance to touch it? Unfortunately, it happens too often especially these days when cash flow is tight and everyday costs are up. But if we change our habits and place any unexpected extra money (such as an inheritance, cash gift, tax refund or even the remote possibility of a lottery win) into the stock market instead, that money will leave you a much bigger impression later on than if you simply spent it. Windfall + stock market + power of compounding = potentially big profits later.
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