Suze Orman says young people should want the stock market to go down. This is why

A man on a call while sitting in front of his laptop.

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It may seem counter-intuitive, but it makes a lot of sense.

Most important points:

  • The stock market tends to experience its share of volatility.
  • Instead of fearing a recession, use it as an opportunity.
  • A down market can present opportunities to invest for less money.

If you’ve had money in a brokerage account or IRA since the beginning of the year, you may have seen your balance drop significantly at various points over the past eight months. It’s definitely been a wild year for the stock market, and while many investors rallied in August, it’s hard to predict what the rest of 2022 has in store.

Now you may be hoping that the market picks up quickly, so that your portfolio can recover any loss in value it suffered earlier in the year. But if you’re quite young, financial expert Suze Orman says you really should want the stock market will fall. This is why.

An opportunity to invest cheaply

A stock market downturn can be a devastating event if you retire within a few years. If your portfolio falls seriously, you may have to delay that milestone until your IRA or brokerage account recovers. (Of course, the best way to protect yourself from that is to have several years of cash spending, but not everyone follows that rule.)

But if you’re young enough that you’re retiring, there’s really no reason to sweat a stock market downturn. Quite the contrary — Orman insists it’s something you should really hope for.

Why? A good approach to investing is to load up on quality stocks and hold them for years (something Orman advocated on her podcast). Some of those stocks can pay you regular dividends. Others may not. Either way, if you hold onto your stocks for a long time, there’s a good chance they’ll gain value, so by the time you’re ready to cash them out, you’re in a good place.

When the stock market collapses, it gives you the opportunity to pick up quality investments at a lower price. And that, in turn, could pave the way for even more wealth-building opportunities.

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Let’s say there is a stock that you want to invest in and that you want to keep for the next 20 years. Wouldn’t you rather buy stock at $150 each than at $200 each? During a downturn in the stock market, you can get that opportunity.

Don’t time the market

While Orman maintains that a stock market downturn isn’t a bad thing for younger investors, it’s also not a good idea to try to time the market, which involves actively trying to buy a stock at its absolute lowest. If you take that approach, you could be spinning your wheels chasing lows and losing.

A better bet? Try dollar cost averaging, a strategy where you commit to buying shares of specific stocks at predetermined intervals regardless of market conditions. The advantage of the dollar cost averaging is that it takes fear and emotion out of the investment equation. Instead, just make a plan and stick to it.

Stock market declines are not uncommon. In fact, corrections, where stocks lose 10% or more of their value, are equally common. When you’re young, you don’t have to let that rattle you. In any case, think of it as an opportunity to buy stocks at a lower average stock price – and reap the rewards later.

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