Canadians: How to Get Rich Off a Market Crash

Corrections are always scary, but they provide fantastic opportunities for savvy investors who maintain a long-term outlook for their portfolios.

Target. Stand out from the crowd

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

At the beginning of this week, the Dow Jones suffered the worst two-day point drop in history. The TSX also started the week with two straight triple-digit declines, falling 385 points on February 25.

Reacting to turbulence in the markets is challenging, because the wisest choice often stands in opposition to what we may consider to be common sense. To crib a now famous Warren Buffett quote, “be greedy when others are fearful.” These are the words Foolish investors should live by.

Why you should adopt a long-term outlook

The 2007-2008 financial crisis was the worst the world faced since the Great Depression. Unsurprisingly, many investors lost faith in the markets. There could not have been a worse time to bow out. Investors have been treated to one of the longest bull markets in history since the end of the 2000s.

Canadian markets have not boasted the explosive gains of their American counterparts in large part because of our energy and commodity-heavy index. In the 10 years to December 20, 2019, the S&P/TSX Composite Index posted an average annual gain of roughly 4%. The S&P 500, by contrast, posted an average annual gain of 11.2%, trouncing the TSX index. That is not to say that investors cannot make a fortune on the TSX — they just need to be selective.

In late 2018, markets were hit hard in a global rout. At the time, central banks were telegraphing a potential policy change. I’d suggested that investors pour into Fortis, a top Canadian utility that has achieved over 45 consecutive years of dividend growth. Shares of Fortis have climbed over 20% since that article was published. Royal Bank, which boasts the largest market cap on the TSX, has also increased 20% since the bloodbath in late 2018. Volatility is scary in the moment, but investors who jump on discounts and ride out the turbulence will win in the long run.

Assets to own in a correction

Earlier this week, I’d discussed the bull run for gold that has stretched into 2020. At one point, the yellow metal had climbed above the spot price of $1,680. It has since cooled off and is hovering around the $1,650 mark. Still, this is a massive uptick when we consider that gold sat below the $1,200 mark less than two years ago in late 2018. It was that market rout, and the about-face from central banks, that has been the spark for this steady climb.

Investors who do not want to store physical gold always have the option to dip into equities. Barrick Gold, which is one of the top gold producers in the world, has seen its stock increase 29% over the past three months. Top producers will continue to benefit from prices that have not reached these heights since the beginning of the 2010s.

Key things to remember

Foolish readers should remember that a market crash is not a signal to flee. On the contrary, now is the time to rummage through the wreckage and find discounts at top companies. At the time of this writing, top stocks like Air Canada and Kinaxis had fallen into technically oversold territory according to their Relative Strength Index.

Fools, now is the time to feast!

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Ambrose O'Callaghan owns shares of FORTIS INC and ROYAL BANK OF CANADA. The Motley Fool recommends KINAXIS INC.

More on Investing

Profit dial turned up to maximum
Tech Stocks

$1,000 Invested in Constellation Software Stock Would Be Worth This Much Today

Constellation Software (TSX:CSU) is trading above $2,000 today. Why this stock is so expensive, and is it worth buying?

Read more »

Dividend Stocks

Passive Income: 3 Top Canadian Stocks to Buy for Monthly Dividends

Companies such as Pembina Pipeline and Killam Apartment REIT pay investors monthly dividends, making them top bets for income-seeking investors.

Read more »

Shopping card with boxes labelled REITs, ETFs, Bonds, Stocks
Stocks for Beginners

TFSA Investors: Top TSX Stocks to Buy With $6,000

Here are two safe, dividend-paying TSX stocks for your long-term portfolio.

Read more »

Gold medal

3 Growth Stocks That Could Be Huge Winners in the Next Decade and Beyond

Are you looking for growth stocks that could be huge winners in the next decade? Here are three top picks!

Read more »

Retirees sip their morning coffee outside.

Retirees: How to Make Over $95/Week in Passive Income TAX FREE!

Canadian retirees who are hungry for passive income should look to snag stocks like Sienna Senior Living Inc. (TSX:SIA) in…

Read more »

Man holding magnifying glass over a document

Where to Invest $500 in the TSX Right Now

Given the massive correction, long-term investors can start buying stocks like Shopify and goeasy to outpace the broader markets by…

Read more »

Aircraft wing plane

Air Canada Stock Is a Fantastic Deal Right Now

Air Canada (TSX:AC) is a great stock to own, as market fear turns into hope amid falling recession fears.

Read more »

Pixelated acronym REIT made from cubes, mosaic pattern

Beginner Investors: Get Passive Income by Investing in REITs!

You can get passive income by investing in REITs like Northwest Healthcare Properties REIT (TSX:NWH.UN).

Read more »