ASX drops below 6,000, time to panic?

The ALL ORDINARIES (Index: ^AXAO) (ASX: XAO) has fallen below 6,000 again after spending three months above the important psychological level.

The 6,000 mark is so important because it took the ASX almost 10 years to get back up to that level after the GFC.

Today, the All Ords Index has plunged by over 3.6% to finish just below the 5,900 level.

Of course, a lot of the index’s return is influenced by the big four banks, BHP Billiton Limited (ASX: BHP) and CSL Limited (ASX: CSL).

Will it be another decade before the index rises above 6,000 again?

I don’t think it will be a decade, but it could be a while.

In-fact, I think investors prematurely sent the index above 6,000 as there are a lot of reasons to be negative about the Australian economy at the moment. Retail sales are falling, households are the most indebted they’ve ever been, house prices are falling and the RBA doesn’t dare to increase the interest rate because inflation and growth is so low.

I’d be worried if most of my portfolio were focused on the top end of the Australian share market, which most index funds, SMSF portfolios and listed investment company (LIC) portfolios are.

However, my portfolio is not focused on Australia’s big blue chips. It is focused on smaller blue chips, mid cap and small cap stocks which will hopefully continue growing earnings regardless of what the economy or share market does. That’s why I’m a shareholder of businesses like National Veterinary Care Ltd (ASX: NVL), Ramsay Health Care Limited (ASX: RHC), Altium Limited (ASX: ALU) and InvoCare Limited (ASX: IVC).

Foolish takeaway

The ASX is still higher than it was four months ago, which doesn’t include the added benefit of dividends. I think this correction is needed as a lot of valuations were getting far too high, particularly in the USA. For me, it’s a buying opportunity.

If I were you I’d want to check out these top stocks now that their prices have dropped.

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Motley Fool contributor Tristan Harrison owns shares of Altium, InvoCare Limited, NATVETCARE FPO, and Ramsay Health Care Limited. The Motley Fool Australia owns shares of Altium and NATVETCARE FPO. The Motley Fool Australia has recommended Ramsay Health Care Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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