Stock market correction 2022: a once-in-a-lifetime chance to get rich?

Image source: Getty Images.

The correction that we are currently experiencing perfectly demonstrates the volatile nature of the stock market. indices like the FTSE250, S&P 500Y nasdaq they have fallen 20%, 24% and 27% respectively since the beginning of 2022.

And with inflation still rising, coupled with a recently announced quantitative tightening monetary policy in the US, there is a chance that prices could plummet further. This is probably why many investors are quite fearful at the moment.

Personally, I’m not that pessimistic. We have been through periods of high inflation sooner and come out significantly stronger in the long run. Just look at where the FTSE 250 is today compared to 1984 – around 18 times higher! So I think this situation, although unpleasant for now, seems like an excellent buying opportunity for my portfolio.

understanding the opportunity

The situation we are facing today is quite unique. The headlines focus heavily on inflation and interest rates. However, these are being driven by a variety of factors, including supply chain disruptions, Chinese Covid-19 policies, labor shortages, delays in semiconductor manufacturing… and the list goes on.

Unfortunately, none of these problems can be magically fixed overnight. But they are not unsolvable. In the long term, these issues will be resolved, allowing the stocks of high-quality companies to return to normal. After all, all the other stock market corrections and crashes in history eventually paved the way for a long period of growth.

So I think this presents an incredible buying opportunity for my portfolio. And it is quite rare. Despite what many believe, these situations are really not that common. We’ve only had four periods of significant rapid decline (including the current one) in the last two decades.

Harnessing the Power of a Stock Market Correction

The fact that the stock market finally recovers from the current correction does not mean that all stocks will. Every business is different. And there are some stocks that are plummeting for good reason.

Rising interest rates mean debt is about to get even more expensive. Obviously, that creates a pretty big problem for overleveraged companies. Meanwhile, with lending activity tightening, finding outside investment will no doubt be a challenge. Therefore, any unprofitable, high-growth company can also struggle if there is not enough cash on the balance sheet.

But for companies that are not dependent on external funding, with strong cash flows, prudent management and a wide competitive moat, I see only one opportunity. In my experience, investing in fantastic deals at double-digit discounts makes a huge difference to my portfolio’s performance. And it can greatly speed up the process of building wealth.

The stock market may very well continue to fall from here, and potentially even crash. After all, no one knows when we will bottom out (we may already have). That is why many investors see buying stocks today as a risky move. But for my own portfolio, I think not investing is the biggest risk.

Leave a Comment