How to Find Opportunity in a Bad Financial Market

Global Markets have been experiencing volatile movements in the past few months sparked by concerns in the Greek economic debt and the European economy. A lot of investors are now pulling money out from the markets on fears that another economic recession might occur. However, according to market experts, investing in the stock market presents a rare investment opportunity during times of recession and market volatility.

Ironically, this time of market uncertainty is generally the best time for an investor to be buying stocks. In fact, it is during the time of recession when some of the greatest investment opportunity presented itself to some of the world’s wealthiest investors. If an investor is smart enough to take advantage of the situation when they can buy stocks for less than what they are really worth then they will be handsomely rewarded once the market started to bounce back.

Remember that poor economic conditions can affect the market as a whole however as long as there is nothing wrong with the company where an investor puts his money i.e. the company has recurring earnings, strong balance sheet, great management team and huge growth potential then an investor can be confident and assured that the value of his investments will surely bounce back to its fair market value once the economy recovers.

It is perfectly normal for the economy as well as the markets to experience booms and busts along with the economic cycle. But as we all know, America is resilient and we know that America will keep growing over time which can be proved historically. Therefore, the economy will rebound and continue to reach new highs and those who took advantage of the great opportunities during tough times will end up with enormous wealth. 

 

Having said that, here are some tips an investor can use in picking stocks during times of economic turmoil and market volatility to take advantage of the rare investment opportunity present:

Look for companies that have double or triple digit growth.  In spite of other drawbacks, a company with massive growth will not be too much affected by the slowdown in economy.

Pick stocks that are undervalued relative to the company’s intrinsic value. Companies with low debt, steady growth and strong earnings are the ones to look out for. This can be seen through the company’s assets, liabilities and cash flow position.

Select companies that have economic independence and those that are not vulnerable to the swings of the U.S. economy. Examples are companies that derive most of their revenues from overseas.

Opt for defensive stocks that focus on food, healthcare and utilities. These companies thrive no matter how the economy is doing and these companies provide the necessaries that even in economic downturn will continue to earn revenues and make profits.

Choose companies that offer a high dividend yield. These companies will be like shelter in a storm and will provide income even in difficult times.

Another tip an investor can do during times of market volatility is to break up his purchasing throughout the year instead of investing money to buy as many shares possible all at once. Using this technique, an investor can buy more shares with his money rather than if he purchased them all at once. Many of the world’s wealthiest individuals made their money using this technique of buying bargained stocks and holding on to them until the markets recovered. 

  

Lastly, value investors are the ones that looks at the intrinsic value of a stock and buys a company that is significantly undervalued and those that are selling at a huge discount. They are the ones who start accumulating shares when everyone is selling and they believe that a fortune can be created when they take advantage of the buying opportunities present during times of market volatility and economic downturns.