Experts Say Market Correction Is Opportunity for Young Investors To ‘Buy the Dip’
The markets at large had a rough start this week, with the S&P and Nasdaq having their worst performances since May yesterday. Cryptocurrencies weren’t spared either, as Bitcoin tumbled nearly 10% Monday morning, falling to $43,780, and Ethereum was down 9.4% at $3,034.
The choppy markets were in large part due to Chinese real estate conglomerate Evergrande’s debt crisis, which made American investors uneasy and fearful of ripple effects, CNN reported. But some experts are arguing that now might be a great opportunity for young investors to buy the dip.
Jamie Cox, managing partner at Harris Financial Group, told Acorns that “any investor with time — multiple decades — should use each and every correction as a buying opportunity.” Most people consider a correction to have occurred when a major stock index, such as the S&P 500 index or Dow Jones Industrial Average, declines by more than 10%, but less than 20%, from its most recent peak, according to Charles Schwab. It’s called a correction because, historically, the drop often “corrects” and returns prices to their longer-term trend.
“Always consider corrections a gift,” Cox added. “You have the opportunity to buy what you always wanted to buy at a lower price.” In other words, if you have a sound investment plan heading into a period of market turbulence, staying the course will allow you to boost your wealth over time, according to Acorns.
Cox elaborated to Acorns that the best thing younger investors can do is essentially nothing: “If you’re a long-duration investor, this is something that is going to be in your rearview mirror very soon. There is no utility at all in trying to trade around something that is going to resolve itself in short order.” He further recommended that young stock investors should make sure their holdings are diversified to prevent a “plunge in any single investment from tanking your portfolio.”
Bryan Slusarchuk, CEO of Fosterville South Exploration, told GOBankingRates that “it’s time in the market rather than timing the market that is the most important thing for young investors to understand,” adding that it’s also important to understand how different asset classes are correlated with one another as to create real diversity within portfolios.
“Right now, all signs are pointing to an inflationary environment that could be very detrimental for new investors who are just starting to build net worth,” he stated. “Gold, for thousands of years, has proven itself as a store of value, a hedge against uncertainty and as a currency. Therefore, I think it’s prudent for investors to consider with their advisors, a gold component within their holdings.”
As for young crypto investors, Ben Weiss, CEO of Bitcoin ATM operator CoinFlip, told GOBankingRates that “crypto is unlike any other investment” and that, while many see crypto price fluctuations as a major setback, people in the industry see dips as a great buying opportunity because you are getting your crypto at discounted prices from recent levels.
“The lower price points can potentially reduce the barrier of entry for retail investors or novice investors willing to trade in Bitcoin for the first time,” Weiss clarified. “The downturn can also be a buying opportunity for younger investors to research altcoins like Ethereum or Litecoin to diversify their crypto holdings.”
Stéphane Ouellette, CEO of FRNT, a crypto-focused institutional capital markets platform, explained to GOBankingRates that while Bitcoin is relatively reasonably priced, there are existential risks based on the fact that so many other bad/untested projects have billion-dollar valuations that are unsustainable.
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Ouellette added that “a sell-off driven by unproven token valuation contraction could prove a good opportunity to buy more mature cryptocurrencies like Bitcoin,” but advises to stay away from cryptos that have existed for less than 18-months and that have billion-dollar valuations.
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Last updated: September 21, 2021