What a brutal start to April with the S&P 500 shedding another 2.23%, sending the index into correction territory for the second time in three months. Before you hit the sell button though, you should realize that we’re in a market where +2% up and down days have become the norm.
We’re back in a correction and could enter the much-anticipated bear market soon, but if that derails your long-term investment goals, then you may need to have a sit-down with a financial advisor, so they can help you get a firmer grasp on your risk tolerance to formulate a plan that’ll better suit your needs — under any market condition.
Bear markets come and go. They’re typically times when a lot of investors get crushed. While buying dips may seem trivial, it’s a lot harder to do in practice, as I’m sure you’ve noticed, especially if the general public is convinced that a crash is on the horizon. Believe it or not, many of today’s investors have no idea what it’s like to go through a market crash.
While it’s insightful to have a glimpse at what happened during the Financial Crisis over a decade ago, nothing beats experiencing the turmoil in real time, which is why some investment firms only hire those who’ve lived through a market crash and have come out the other end with their shirts still intact.
Market crashes and bear markets are opportunistic times for patient and disciplined investors that can keep their emotions under control. It’s an incredible sale, just like any other, but instead of the crowd stampeding towards the entrance, they’re heading for the exits, because when times get tough, many investors realize that they weren’t as risk tolerant as they thought they were when the bull market was in beast mode.
The sooner you treat crashes, corrections, and bear markets as opportunities to put money to work, the less you’ll be frightened by ominous headlines, and the calmer you’ll be when pulling the trigger on stocks that have been waiting on your correction shopping list.
If you don’t have a correction shopping list yet, it’s not too late to make one. Here are three stocks that are on my radar that I intend to pick up should the losses steepen: Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM), Toronto-Dominion Bank (TSX:TD)(NYSE:TD), and Northland Power Inc. (TSX:NPI).
These are high-quality dividend stocks whose yields will continue to climb amid the market bloodbath. All of them, I believe, are safe, and each business has a means to grow its dividend in the foreseeable future, regardless of which direction the broader market is headed.
By having a correction shopping list, you’ll be less inclined to panic when you see your personal portfolio down by +2% on any given day. You’ll check your correction shopping list to see if it’s time to pull the trigger on any one of the battered stocks, so you can lock in a higher yield or lower your cost basis to get the next leg-up once the markets inevitably rebound.
Have you always wanted to own shares of a particular company, but the valuation wasn’t really in your ballpark? Well, they’re going to start entering your ballpark, so make sure you’re ready to swing once the ball finally enters your strike zone!
Stay hungry. Stay Foolish.
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Fool contributor Joey Frenette owns shares of CANADIAN IMPERIAL BANK OF COMMERCE and TORONTO-DOMINION BANK.