by Jason Moser – Motley Fool One Analyst
The question we deal with all the time seeing in investors, is: They are wondering when is a market correction coming? Should we expect a market correction? And the easy answer to the question is: Yes, you should expect a market correction.
But the question is really more relevant to the timing part of it, as when should we expect a market correction.
A Pullback Of At Least 10%
That’s a little bit more difficult. First and foremost, if there is a pullback in the market of at least 10% and we see those time to time, especially if the market gets a little bit ahead of itself and its get a little bit expensive.
So, definitely correction happen. It’s not something that really concern yourself with. It’s really difficult when they may happen, but you at a look at today’s market for example.
When interest rates very low, the stock market is been the place to be. It’s where the returns are. A lot of money going into the market. A lot of people are chasing yield dividend stocks because fixed income investments are necessarily as a rewarding. We are seeing record inflows into US stocks in this demand, pushes the prices up.
Look at what Warren Buffet has said time and time again. It even today when he was in the market is relatively fairly valued he is always in the mindset that net buyers of stocks need to be looking for those corrections and times when stocks pull back. And that’s important because it gives us an opportunity to pick up stocks on sale more less and better prices.
If You Have $5.000 To Invest
But if you have money to invest today for example take $5000 . Yes give that investment in the market but don’t feel like you to get everything going there once. Invest that slowly. Make sure you keep the transaction cost to no more than 2% of your investment.
Give you an example here
If your commission cost of buy stock is seven dollars, then make sure you buy at least $350 worth of stock, in order to meet this threshold. That keeps commission cost low. They can indeed eating your return if this commission cost get out of hand.
Have a watch list
If you don’t, make sure you start building a watch list. When you have some money to invest in that you have this names of ready to go when you feel like the price is become attractive and you add to those positions.
And the bottom line really is:
Foolish investing means constant investing. It is not trying to time the market or to trying to look for market corrections. We are simply trying to invest in the good times and the bad – in quality businesses.
And again: Always referred back to the Warren Buffet’s idea. There would be net buyers of stocks net buyers of stocks love market corrections because that means we get the favorite stocks on sale. I totally agree with this.