The recent stock market correction was widely expected since there hadn’t been one for a while. Toronto market dropped more than 12% from its recent high and started to recover from the sell-off. I guess it is a good time to do a quick portfolio check up and see how it performed during the correction.
A few months ago, I wrote a post about ‘how I am preparing for a market correction’ and expected that my portfolio will drop by 10% or $10 000 if market correct by 10%. Also, I mentioned that I am preparing for a shopping list and sharpening up my buying power.
As expected, Canadian market dropped more than 12%, and the energy sector was hit harder, plunged more than 20% in few days. But, my portfolio dropped less 6% (or $6000), many thanks to my utilities holdings and some other low beta defensive stocks.
Also, recent correction created a buying opportunity to purchase some high quality stocks from my watch list. I invested more $10000 and bought five dividend growth stocks at bargain price.
Also, I prepared another $10000 to invest if the market drops further. But, it didn’t happen. I really don’t know the short-term market movement.
What I was doing during the correction?Even though I invest for long-term, I regularly check my portfolio performance (bad habit). But, it was really hard to see when portfolios drop more than $1000 in a single day. So, I stopped checking them for couple of days and let the market to play out. Honestly, it wasn’t a fun to watch losing $6000 in few days but I controlled my emotion and kept adding more quality stocks.
Fortunately, my portfolios fully recovered from the recent sell-off and started to move above the green lines.
Here are few things I learnt in the recent market correction:
- Correction is normal
Stock market correction is a normal part of the market and we should expect this roughly every 12 months in bull market.
- Timing market is a foolish game
Actually, nobody can time the market. It is really a guessing game.
- Stick with high quality companies
Buy only high quality stocks – they protect your wealth in bear market and recover faster than other high beta stocks.
- Diversify your investment
In the recent correction, energy sector dropped more than 20% while utilities stocks stayed in positive territories.
- Don’t panic and sell
Of course, selling in a panic is not a smart move. Remember the old adage: Buy low, sell high. When you sell your holdings after a market drop, you are doing just the opposite.
- Look for long term
Nobody really knows what will happen to the market tomorrow or next week or next month. But, many of you know that market has returned more than 11% with dividend for long-term, which is more than any other assert class. Thus, invest for long makes more sense than short term guess game.
I borrowed around $5000 to invest during the correction and the leveraged approach rewards well as my recent purchases started to move up. Currently, I am focusing to pay down the debts and preparing for next market down turn – therefore, sharpening my buy power.
The information posted on this website are the opinion of my own and should not be considered professional financial advice. I am not a financial professional, and I can buy, sell, or hold any investment at anytime. Please consult with your financial professional before even considering using the information obtained from this website.