Just as world famous investor Warren Buffett loves to buy in falling markets, so too should all long-term investors who want to successfully grow their wealth.
The recent 10% plunge in the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) which took the index back below 5,000 points before a quick two-day rally up above 5,200 again has opened up numerous investment opportunities.
These opportunities are most appealing for long-term investors who have set themselves and their portfolios realistic goals such as compounding their returns year after year to grow their wealth to millionaire status.
Consider this:
Starting with a lump sum of $50,000 invested into an equities portfolio, managing to achieve an interest rate of 8%, and compounding this rate of return for 40 years will result in a total portfolio value of $1,086,226.
Meanwhile, from the same starting base and for the same time period but at a 12% compound return your wealth balloons to a massive $4,652,549!
A number of high-quality blue-chip stocks have been sold down over the past six months, for example:
- Telstra Corporation Ltd (ASX: TLS) is down over 6% and trading at $5.80 a share
- Commonwealth Bank of Australia (ASX: CBA) is down over 15% and trading at $76.70
- Wesfarmers Ltd (ASX: WES) is down 8% and trading at $40.15
These declines would appear to have brought the above three stocks closer to their respective fair values. For long-term investors who are trying to achieve and compound a return that will make them millionaires, cheaper prices should be welcomed as an opportunity to buy quality businesses at levels which could provide for a larger long-term gain.