30 Aug 2024

The Sky Is Falling!

Leonard Koh

The markets were making losses in the weeks leading up to 27th August 2024. A market correction happened at the start of August 2024 which caused many investors to sell off their stocks due to fear. In fact, there was an opinion piece by Mark Hulbert, dated 18 July 2024, where he talked about a possible market correction by mid-August 2024.

As fearful as some were of a market crash, we need to understand that market corrections are different from market crashes. As explained by Brian Baker in a Yahoo Finance article: "A crash is a sharp drop in share prices, typically a double-digit percentage decline, over the course of just a few days. A correction tends to happen at a slower pace, therefore making the drop less steep than a crash would be."

And this was a much needed market correction to stop things from getting overheated.

Let's put things into perspective. What you fear when the stock market dips is a snapshot of what you see in a day, a week or possibly a month, as you can see below.

Image: finviz.com (27 August 2024)

But if you have been consistent with your investment, and even if you started investing for only a year, check out the returns you would have made.

Image: finviz.com (27 August 2024)

Yes, it feels scary to have lost some money in that given day. No one likes to lose. But when you zoom out, you would have still made a good amount of capital gains in that one year. That means if you invested $1,000 in NVIDIA Corp stock on 27 August 2023, you would have $2,681.30 on 27 August 2024 with the market correction.

What can you do to mitigate the emotions you feel when you see stock prices fall?

1. Have a long term investment strategy.
2. Ensure your investments are well diversified.
3. Zoom out and see the bigger picture.
4. If you have extra cash, invest even more.

Afterall, as Warren Buffet once said, "be fearful when others are greedy and to be greedy only when others are fearful."