Did we rejoice too soon?
Investors celebrated yesterday after the S&P/ASX 200 (INDEXASX: XJO) managed to string together two consecutive days of gains to narrowly avoid falling into a "technical correction".
Indeed, credit goes out to Australia's biggest miners – in particular Rio Tinto Limited (ASX: RIO) and Fortescue Metals Group Limited (ASX: BHP) – which propelled the market higher on Tuesday. Then the big four banks and Telstra Corporation Ltd (ASX: TLS) played their role on Wednesday too, allowing investors an extended opportunity to catch their breath.
But it seems the celebrations may have come prematurely.
The Australian stock market is bleeding once again, down 70 points or 1.3% following a wild night on Wall Street (in fact, at one stage the S&P 500 was down 3% – its heaviest decline in over three years).
Each of Australia's big four banks and mining giants have returned to the red while Woolworths Limited (ASX: WOW) and Wesfarmers Ltd (ASX: WES) are both down more than 1.6%, too. Given that these companies have such a heavy weighting in the ASX 200, it's been almost impossible to avoid the carnage.
A Selling Frenzy
For an investor, there's nothing scarier than the thought of the market taking a dive.
This is especially the case when the words "correction" or "market crash" start getting thrown around the room.
Indeed, many investors react instinctively in these tough times. With no control over the market's mood swings and with their overall wealth being threatened, they sell in a state of panic to limit the hardship and the losses.
But there are two sides to this story…
A Buyer's Dream Opportunity
While a market correction is one investor's nightmare, it is another investor's dream come true.
While it can be a scary thought to buy shares when they are plummeting in value, such times can actually be one of the greatest opportunities you will ever have to do so. Even with the market staring down the barrel of a market correction, I'd be more than willing to take a leaf from Warren Buffett's book in saying: "Be fearful when others are greedy and greedy when others are fearful."