The past month has been a dark one for ASX investors. As most readers would be aware, the ASX has been in the grips of a nasty share selloff. With today's near-2% slide for the S&P/ASX 200 Index (ASX: XJO), we have now officially entered 'correction' territory. A correction is arbitrarily defined as a fall of 10% or more for an index's most recent high. And given the ASX 200 has gone from 7,632.8 points back in August to a low of 6,758.2 points today (a drop of 11.46%), we are well and truly in correction territory.
So this is undoubtedly a tough time for many investors out there. Share market falls of this magnitude usually impact most investors' share portfolios in a meaningful way. And it's never fun to see the shares you have bought with your hard-earned dollars lose their value at the whim of the market.
But it's of paramount importance from a wealth-protection standpoint not to let disappointment in what the share market has done become full-fledged panic. So here are 3 reasons why investors shouldn't panic right now:
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3 reasons not to panic during this ASX 200 correction
Look to history
Although it can be hard to see the forest for the trees on days like today, remember, share market corrections and crashes are a normal and healthy part of the investing journey. The ASX's history is littered with bumps and falls, corrections and crashes. And yet, the markets have never once failed to overcome a previous all-time high.
We all remember the very frightening COVID-induced crash of 2020. That saw the ASX 200 lose more than 30% of its value over just a month or so. And yet, looking back, it took just over a year for the ASX 200 to fully recover from that crash and climb to previously-unseen highs. No one knows how this current period of turbulence will last for. But history tells us that time eventually heals all share market wounds.
There are always dividends
Even though your share portfolio might have taken a nasty haircut recently, remember that there's not much in the way of returns if you have your cash in the bank instead. With interest rates still at record lows, many investors would have bought ASX shares to put their cash to work and get some dividends in return. And companies are still paying dividends. So even though it doesn't feel like it, your cash is still at work, and potentially delivering dividends too.
This could be a buying opportunity
The legendary investor Warren Buffett is famous for doing most of his share buying during market corrections or crashes. In fact, he once likened it to 'putting out a washtub when it's raining gold'. The reality is that while buying shares during market corrections can be downright terrifying, it's also usually some of the rare occasions where good-quality companies go on sale at cheap share prices.
So keep an eye on your best investing ideas. Hopefully, these are companies that have such strong business fundamentals and pricing power that they can handle almost anything the world throws at them. You might not get a cheaper price to buy those companies than what we have recently seen. They don't say that more millionaires are minted during share market crashes than at any other time for nothing!
