Is Buying The Dip A Good Idea?

Is Buying The Dip A Good Idea?

almost 4 years ago2 mins

Stocks are tanking: the US market has dropped almost 19% in just 19 days. But while many investors predict imminent recessions in America and Europe, some think things could quickly bounce back – and they’re sticking to their stocks 💪

What does this mean?

The economic impact of the coronavirus will be significant, especially if other countries follow Italy in placing regions on lockdown. It may, however, also prove to be relatively short-lived.

Central banks have already leaped into action, and more moves may follow. The European Central Bank appears certain to follow its US counterpart in cutting interest rates this week, with the only question being by how much. What’s more, the sort of “fiscal stimulus” that was so divisive just a few months back – think government spending hikes – now looks increasingly popular.

Investors expect the pink to spread
Investors expect the pink to spread

The stock market correction, meanwhile – now approaching “bear market” territory – was perhaps overdue after a 30-month streak. And while further central bank intervention may take time to impact economic growth, stock investors have much quicker reactions. The selloff could, therefore, be nearing the bottom… 😬

Why should I care?

The full impact of a slowdown on company earnings and access to credit remains unclear, as does the risk that central banks overreact now and are left looking like Mother Hubbard.

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But it’s not all doom and gloom. Cuts to interest rates may put more money in mortgage-paying homeowners’ pockets – and for level-headed Finimizers who know investing is a long-term game, temporary stock price falls may offer a buying opportunity. After all, those following a dollar-cost averaging approach are currently picking up US stocks for 19% less than they were three weeks ago 🤩

Still, in turbulent times it's usually a good idea to steer clear of unnecessary risks. Cryptocurrencies have had an even worse few days than stocks, with bitcoin and the gang dropping more than 15% after scammers reportedly flooded the market with $100 million worth of ill-gotten crypto gains…

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Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.

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