Anonymous
Anonymous asked in Business & FinanceInvesting · 9 years ago

If the stock market were to crash, should it be considered a buying opportunity?

My knowledge of economics in general and of the stockmarket are very limited, but hypothetically speaking, if the stock market were to virtually crash, can this be considered a good buying opportunity and do the benefits outweigh the detriments?

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  • Mike
    Lv 6
    9 years ago
    Best Answer

    Yes but you should be careful what you buy. Although p/e ratios are low with the DOW and the S&P500 at about 12:1, that is well below normal but who is to say that it can't go to 9:1 or 10:1 and stay there.

    Therefore with the uncertain turbulent market, it would probably be wise to invest in high dividend blue chip stocks on a pullback. Currently the DOW is paying an average of 3% dividends and with a pullback, that could be 3.5% or more. Therefore for diversification, the Diamonds ETF (DIA) which tracks the DOW would likely be a wise move.

    Add to that, high dividend blue chip stocks. Many blue chip stocks are currently paying a high dividend yield of 4%-7%. With a 20% pullback in the market, they will be yielding 6%-9%. Blue chip companies such as AE&T, Verizon, Pfizer, Eli Lilly, Bristol Myers Squib, Merck, Con Ed, Duke Energy, Phillip Morris, Altria, Dupont, and Royal Dutch Shell are all in that category. Even if the market doesn't recover from a 20% loss, you will be back to even within 2 1/2 to 3 years due to the dividends you will be receiving. However, with yields of 6%-9%, it is likely that investors will start buying those stocks forcing them back up.

    As long as you don't get greedy and try to purchase high growth stocks that pay little or no dividends, the market should be very safe. Although you could make a killing with those stocks (they may drop 50% on a 20% pullback), you could also lose your a$$ if the market doesn't recover or pulls back further.

  • ?
    Lv 4
    3 years ago

    I do not know something for my part approximately Sonic. The marketplace rate is founded at the opinion of many buyers- in different phrases there's a rationale it's so low. I am certain there are marketplace "geniuses" that think it is going to move up and a few that think it is going to move down. You aren't quite making an investment you're playing. Hey possibly this may increasingly move up and I'll make a few cash. If you do not know what you're doing the marketplace is an costly instructor. You would not input a poker match with out teaching your self approximately how you can play poker. If you did not you could lose your blouse. The identical with making an investment. To a point studying a couple of positives approximately a inventory after which striking $ten thousand into it's like striking $10,000 on a horse that you just heard was once a well racer. Before risking the $ten thousand why now not train your self. It can be anything you'll use the relaxation of your lifestyles. Try studying the Boglehead's Guide to making an investment. Don't attempt to ranking with a enormous win on a unmarried inventory. That is undoubtedly a loser's sport. You must realize that the exceptional minds within the industry i.e. those who control inventory price range and pension plans - best approximately one million/four beat the marketplace in a given 12 months they usually frequently best do it for a couple of years earlier than they fall again into the % of beneath marketplace returns.

  • 9 years ago

    I've been studying the stock market for a while, it is true that now is a good timing to purchase stocks. However, there is no guarantee for stock tradings. I move on to open online franchise store, owning more than doing stock tradings :)

    Source(s): self
  • Anonymous
    9 years ago

    Only if you're right.

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