3 reasons why this downturn could present new opportunities for investors
In the fall of 2008, with the US economy faltering, Warren Buffet went shopping.
As others scrambled for the exits, the Oracle of Omaha made multi-billion dollar investments in companies like Goldman Sachs, Bank of America and Dow Chemical. He reaped an estimated $10 billion in profits when the market rebounded.
As Buffett famously said of both socks and stocks: “I like buying quality merchandise when it is marked down.”
Right now, new investors would be wise to consider following Buffett’s example, if on a smaller scale. Though storm clouds loom and events like the FTX collapse have some running scared, it could be an optimal time for new investors to get their feet wet — with a few caveats.
As an investor and venture capitalist who has weathered two decades of market swings, I know this bear market could present an opportunity for new investors with disposable income who are willing to hold investments long-term.
This year has been a wild ride, with market valuations ping-ponging ever since the benchmark S&P 500 index officially entered bear territory in June.
But the upside is new investors can get some fantastic bargains now that valuations have fallen back to earthly levels. Indeed, value investors are already picking up undervalued stocks poised to rebound in the years ahead.
Unlike last January, when the soaring market defied the laws of finance, this year has brought valuations back into alignment with business fundamentals like cash flow and price-to-earnings ratios. In other words, the rules of business apply again, making it easier to analyze a company’s health and prospects.
Finally, a downmarket buy makes it more likely that new investors could have positive experiences and modest positive returns as the economy
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