The local share market is under attack!
Investors are trying to make sense of what's actually going on with the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) on track to record its worst monthly loss since May 2012.
That's what The Australian Financial Review reported on Thursday, although it's now set to make May 2012's return look like child's play.
The local share market crumbled as much as 113 points or 2.1 per cent on Friday, before ending the session 1.4 per cent lower.
It plunged 2.6 per cent for the week and is down 8.5 per cent since the beginning of the month, dwarfing the 7.3 per cent loss recorded in May 2012.
"It's all about China", reported the AFR which quoted Daniel Ives, the managing director at FBR Capital Markets in the US.
That's right, the shockwaves from China are being felt all around the world with Wall Street also crumbling late in the week.
It's easy to see why the market is fretting so much…
For so long, China has acted as the engine room for the global economy, recording phenomenal growth rates that may never be matched again.
If China slows, so does the rest of the world…
Fears are spreading that the losses endured on its stock market could spill into the real economy. In fact, their market is down a whopping 31 per cent since mid-June making our loss seem almost comical.
Meanwhile, the Chinese yuan has been severely devalued making it tougher for countries like Australia to export our goods.
That's not so good for our mining sector, and offers at least part of the explanation behind the heavy falls endured across the industry in recent times.
It's pretty clear that even mining behemoths like BHP Billiton Limited (ASX: BHP) and Rio Tinto Limited (ASX: RIO) are under intense pressure right now, and investors would be wise to avoid the sector altogether.
That's not to say investors should avoid buying shares altogether, however.
Outside the mining sector, there are some wonderful opportunities beginning to present themselves.
As the old saying goes, "The time to buy is when there's blood in the streets."
Historically, that's certainly proven to be the case with investors who buy quality companies during the dip performing significantly better than those who sell into the panic.
Just look as far as Warren Buffett, and Peter Lynch, and Benjamin Graham, who all made their fortune through buy and hold investing.
Whether or not the market has further to fall remains to be seen, but you can be sure there are plenty of fantastic companies just waiting to be snapped up.
As unnerving as it may be, the future will likely thank you for buying shares today.
