Market corrections

Market corrections: something to fear – or a buying opportunity?
Market corrections can make novice investors nervous

Sitting tight is often better than selling up

The best mindset is to see corrections as buying opportunities
Wednesday, 8th October 2025

Dear Fellow Fools,

Years back, I remember reading an angry message from a poster on an Internet investment forum. He’d been investing in an index tracker on an investment platform, it seemed, and – as happens from time to time – there had been a market correction.

The market had ‘corrected’ – that is, fallen – by 10% or so. And so, naturally enough, the value of our hero’s index tracker investment had also fallen. By exactly 10%.

How could this happen, he raged. How could the index tracker’s managers have been stupid enough not to liquidate the tracker’s underlying investments at the first sight of trouble, when – apparently – a 10% market correction was blindingly obvious for all to see?

Our hero could not be mollified, despite the best efforts of other forum members. It mattered not to him that an index tracker’s job is to track the index, and that it had done just that. Perfectly, at low cost.

He was down 10%. And investing, he raged, was a total scam.

 
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Timing the market is a rare gift
Clearly, he was mistaken on many, many fronts.

And it’s true that the managers of a different kind of investment fund might indeed have liquidated a part of its holdings – but only a part.

Because if there’s one thing that more difficult than judging when liquidating investments might be prudent, it’s judging when to buy back in.

And as we saw after the financial crash of 2007-2009 – when the FTSE 100 fell 48% – the difficulty of timing when to buy back in caught out plenty of those who decided to ride out the worst of it in cash.

I saw plenty of people back in late 2010 and 2011 who realised, ruefully, that they’d left it far, far too late.

Given the old adage about “time in the market” being better than “timing the market”, it’s often better, in my view, to just ride out the storm. That way, you’re at least sure of catching the upwave when it comes.

Don’t sell – buy!
But our investor missed another important point.

Rather than selling, he should have bought. Market corrections can make a perfect time to ‘average down’ an existing holding, or get a good entry price for a new holding.

For income investors, there’s yet another attraction: with an unchanged dividend, a 10% drop in the share price delivers an 11% increase in the yield. Do the maths – see for yourself.

And bigger price falls produce a commensurately higher yield, of course.

Seasoned investors recognize this, of course. It’s what “buying the dips” means.

When to be greedy
And occasionally – as with the financial crash of 2007-2009, or Black Monday in the 1980s, or Covid, or the aftermath of the Brexit referendum – falls in the market can be precipitous.

Rather than liquidating their investments and getting out of the market, many seasoned investors see such events as a rare opportunity to load up on quality businesses that have been marked down by general market turmoil.

American-British investor Sir John Templeton – the Warren Buffett of his era – summed it up well: “Buy when there’s blood in the streets”.

Warren Buffett himself said much the same thing: “Be fearful when others are greedy, and be greedy when others are fearful.”

It can call for strong nerves, I grant you. But when normal market valuations return, the resulting portfolio will be its own reward.

Until next time,

Malcolm Wheatley
Investing Columnist,
The Motley Fool UK

A market correction is an opportunity, unless your plan is to use the 4% rule and if that happens just as you start to spend your hard earned it’s a disaster.

With hindsight it’s easy to see the bottom of the market but in real time it’s much more difficult but as prices fall the yields rise and if you are happy buying the yield the risk is reduced. Remember there is no such thing as a risk free trade. GL