5 Things To Do During A Market Correction

3. Whip out your 'shopping list' for stock bargains.

We all know that stock markets move in cycles and legendary investor Warren Buffett have made his fortune buying big stakes when there's bloodshed in the markets. Bear markets can provide great opportunities for investors. The trick is to know what you are looking for. Start by jotting down a list of stocks you’d like to acquire at lower prices. I have heard many investors lamenting that they miss the bull run for the banking and telco stocks during the sharp spike the past 12 months. Is it time for them to dive in or wait at the sidelines during a correction? I can't answer this crucial question for them but there is one thing i know can be beneficial for them. Prepare a watch-list beforehand such that you eliminate more than 80% of your emotions/anxiety. Warren Buffett often view bear markets as great opportunities to load up on companies he favour over the long run.  For example, Buffett acquired US$5 billion in preferred shares of Goldman Sachs during the Global Financial Crisis, and got another $5 billion worth of warrants (can be converted to common shares). In 2011, Buffett earned a whooping US$500 mil after Goldman bought back the preferred stock for US$5.64 billion; warrants not included! Hence, ask yourself this question:

"What stocks would you be willing to scoop up with both hands when their share prices are falling with the market?"

4. Don't Time the Market | Do Nothing

One good strategy is to simply do nothing. Yes - do nothing. Over the last 20 years, the S&P 500 rose by an annualized 7.7%. This is a fabulous return compared to almost any other asset class: A US$100,000 investment in the S&P 20 years ago would have compounded into US$440,873.57 today (before fees), if all you did was buy and hold. In short, all you did was nothing. Instead, the average investor has earned a sad 2.3% annually over the last 20 years. Today, that $100,000 nest egg is worth $157,584.20. The sum is almost 1/3 as compared because the investor has attempted to time the markets to no avail. Hence, avoid timing the markets. No one can know for sure when a correction or rebound will happen. The Wall Street Journal doesn't know, and neither does Warren Buffett.

5. Turn off the Media 'Noises'.

Every day, the media is full of news, commentaries and opinions that aim to influence you into making the wrong investment decisions. I always like to use the above picture sourced from broadswordcapital.com. If you look at the comments from Marc Faber, the markets' prognosticator known as "Dr. Doom",  he has predicted that the markets will suffer a meltdown 3 times over the course of 3 years. Each time, the markets continue to punch higher. In fact, S&P 500 Index is trading at around 2,800+, more than double from Dr Doom's first comment in 2012. If you have avoided investing due to all these 'noises', you would have been pretty disappointed.

Conclusion

To end off, remember to invest in only what you can afford to lose. While investing is important to build your nest egg in the future, but so is eating and keeping a roof over your head in the present. It is also vital to not assume that minor corrections can't morph into prolonged bear markets. Having a cash hoard can be liberating in the sense that it can tide you over the down periods and even allow you to snap up bargains when others are stuck in the rut.