A correction of the bear market may prove to be beneficial for an investor provided the right investment instruments are selected in the process. Correction is different from a bear market because a correction is short lived with respect to duration as well as magnitude. The article below highlights the salient features of correction.
Correction of bear market may be referred to a situation when major indexes of the market fall by 10%. During this situation, the prices of stocks decrease.
While this is happening, investors, not equipped to meet the situation incur loss on their investment portfolios. Experts suggest that investing in stocks is the best way of getting good returns, more importantly when a correction is underway.
Correction and how it differs from the bear market:
Correction should not be confused with a bear market situation. Both the duration and magnitude of a bear market is longer than a correction. Correction of bear market can help in upgrading the quality of investment portfolios at a smaller cost.
Experts often suggest that investors should remain equipped with enough cash should a bear market correction is anticipated or declared. It has been noticed that stocks are the most preferred assets and are likely to perform to the optimum in the near future.
Events while correction of bear market is taking place:
Economists suggest that when assets are being sold, the money obtained from the sale ought to be held on to (especially in the Treasury Bills or Money Market Account) so that it can be used for investing in the stock market when the correction process is going on.
One is also required to design the investment portfolios in such as way that the risk is minimized.
An investor should keep track of the sectors, which are doing well in the economy. The investors ought to eye the securities of any company that have manifested considerable growth.
Bonds need not be invested in.
Commodity markets such as gold and real estate are a traditional manner of investment.