Every few years, the markets hand you a gift. At the time, it looks like a mud pie… many investors shun the gift. They throw it away. Only to realize months and years later just how great the gift was.
What gift am I talking about?
The gift of a market correction.
Now many of you are looking at me a little cross-eyed right now. I can see what you’re thinking… Since when is a market correction a gift?
You’re right to question me… but what I’m going to do is challenge you to think outside the box. Try not to think of a market correction as a bad thing. Instead of dwelling on the current value of your portfolio, shift your view.
Look at a market correction like a discount sale at your favorite store. When the stock market experiences a correction, it’s a gift. It’s an opportunity to buy some of the best run companies in the world at prices you’d only dreamed of!
There have been numerous “gifts” given to investors over the years. Smart ones stepped up and took advantage. They bought hand over fist… making millions in the process.
Remember, a market correction is a very natural phenomenon.
They happen all the time. Some are caused by market specific bubbles, others are caused by manmade acts, and still others are caused by Mother Nature. Any way you slice it, a market correction is a natural part of the investing cycle.
Right now, one overseas market is in the midst of a market correction. If you play your cards right, the rewards could be phenomenal. I’ll tell you more about it in a moment. But first let’s take a quick look at some past market corrections.
By studying the past, you’ll be able to recognize them yourself in the future.
For example, look at one of the greatest market corrections of all time… the Great Depression.
For many, this time in American history needs no introduction. We had just seen the roaring ‘20s, the invention of mass production, the end of World War I, and the widespread sale of the automobile. Optimism was high.
But the market got too hot, too fast.
And in October of 1929 the market came apart. The stock market faced a serious and prolonged correction… over 80% of the value was lost. And the entire US economy suffered.
Now there’s a lesson to learn here…
In the worst market correction in US history, some very smart investors turned their tiny piles of money into millions… and hundreds of millions!
Take for example Floyd Odlum. He started investing with $39,000 during the great depression and turned it into $100 million! Howard Hughes founded Hughes Aircraft in 1932… making him a millionaire. And J. Paul Getty used the depression to buy up oil companies… and we all know how well he did!
My favorite example however is Sir John Templeton.
In 1939 the market was still in a depressed state. He borrowed $10,000 from a boss and proceeded to buy every stock on the New York Stock Exchange trading for less than a $1. Within 4 years, he was rich!
Investing during a market correction – if done in the right ways – can turn humble amounts of money into mountains of cash.
So let’s look at another correction.
There seems to be a big correction every few decades… but while some are caused by market bubbles like the Great Depression, others are caused by man. Just look at the market during the bombing of Pearl Harbor.
Back in December of 1941, the Japanese attacked Hawaii, and the markets plunged. It wasn’t a good time in America… or the markets. But not only did the markets snap back within a few years, they thrived.
We witnessed it again in the summer of 1990, during the Persian Gulf War.
Just look at the chart…
Chart courtesy of StockCharts.com
The market was flying high during the summer of 1990, only to be knocked down by news of Iraq invading Kuwait. Within 3 months, the market had fallen almost 20%. It was ugly… but it was a gift to investors. The market subsequently rebounded and just over half a year later was trading at pre-war levels.
There are hundreds of examples out there… And I see one shaping up right now.
Just look across the Pacific to the country of Japan.
A few weeks ago the country was rocked by a massive 9.0 earthquake. As if that wasn’t enough, they were hit by a massive tsunami. Villages and entire towns were destroyed. The impact of these natural disasters will be felt for years if not decades… My heart goes out to all those who are suffering.
But the real impact…. The real challenge to the people of Japan was manmade. A group of nuclear reactors are in dire straits. They were hammered by the earthquake and the tsunami and badly damaged.
How much radioactive dust, water, and pollutants are they spewing out? It’s anybody’s guess.
The entire situation is scary and not one to give investors much comfort. It’s still touch and go at the plants … the worst might happen… a total melt down is still possible.
But here’s the deal. As an investor you know this is a horrific accident. It is scaring the living daylights out of people. Everyone is selling. Many stock accounts are being sold down and the Japanese market is taking it on the chin.
Could it continue to fall? Of course.
Could Japan see further destruction and more fallout from the nuclear accident? Sure.
Could the situation get much worse… before it gets better? You bet it can.
But the time to strike is when everyone is still fearful. Is Japan going to disappear? No, of course not. Will they eventually recover? Of course they will. Here’s the key – if you buy into this volatility now… when the outcome is less certain… you have the potential to turn a tiny investment into millions!
As the Baron Rothschild famously said, “The time to buy is when there’s blood in the streets!”
Now a word of warning… don’t just run out and put your life savings into the first Japanese stock you find. You need to have a strategy.
Look for Japanese companies who are leaders in their industry. Focus on the biggest and best. As the markets recover they will probably be some of the first to rebound.
If you don’t want to take the time to research individual stocks, consider picking up a Japanese specific ETF. They often own baskets of Japanese stocks, and depending on which one you pick, the returns could be off the charts.