Why ASX investors should cheer on the correction

Two big reasons ASX investors should be cheering on the market correction.

| More on:
a woman

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

The ASX has officially entered correction territory, falling 10% off its peak just weeks ago. The accompanying news stories speak of spooked investors going to cash — some commentators are perhaps getting a bit ahead of themselves as well, already announcing the beginning of a prolonged bear market.

No one likes to see his or her investments going into the red. But to panic is a mistake, perhaps a costly one.

Why? Because, speaking generally, if you buy stocks, you’ll be paying lower prices. If you’re going to be a net buyer of stocks in the future, “you are hurt when stocks rise” but “you benefit when stocks swoon” as Warren Buffett has said.

For Australians who’ve been looking for greater returns on their cash than are currently offered in term deposits, the pickings are improving. When stocks get caught up in one of the market’s periodic bouts of pessimism, share prices sink while dividend yields rise. You pay less, but may receive more. Buying high quality companies like Woolworths (ASX: WOW) or Wesfarmers (ASX: WES) can become more attractive, as yields rise and dollar-cost averaging turns in your favour.

Consider Telstra (ASX: TLS), with its 28-cent fully franked dividend, representing a 6% dividend yield at today’s price. With a built-in return of 6%, investors are already soundly beating inflation and term deposit rates and are on the way to a market-beating return.

No less than The Australian Financial Review says “good quality Australian shares that have a long history of paying dividends are a real alternative to a term deposit.” Get “3 Stocks for the Great Dividend Boom” in our special FREE report. Click here now to find out the names, stock symbols, and full research for our three favourite income ideas, all completely free!

More reading

Motley Fool contributor Catherine Baab-Muguira owns no shares in the companies mentioned in this article.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

asx share price competitions represented by businessmen arm wrestling
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

person reading news on mobile phone
⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »