Stock market correction: A once-in-a-decade chance to get rich?

S&P/ASX 200 Index (ASX: XJO) investors might be approaching the end of the year with less enthusiasm than they closed 2021 with. Indeed, it’s been a trying year for market watchers. The index has so far backed up last year’s 13% gain with a 6.5% tumble. But I believe there’s a good reason to celebrate the ASX 200’s market correction.

It has likely created numerous buying opportunities capable of building riches.

Stock market correction or wealth-building opportunity?

There’s a bit more to the ASX 200’s 2022 fall than meets the eye. Namely, the vastly different performances posted by its various sectors.

The index has been buoyed by soaring energy shares and a strong performance from miners this year.

The S&P/ASX 200 Energy Index (ASX: XEJ) has jumped 37% year to date amid soaring oil and coal prices, mainly spurred by the conflict in Ukraine, and the S&P/ASX 200 Materials Index (ASX: XMJ) has outperformed the broader market by around 10% so far this year.

Conversely, the S&P/ASX 200 Real Estate Index (ASX: XRE) has plunged 25% amid rising inflation and resulting rate hikes.

Similar factors have likely dragged the S&P/ASX 200 Consumer Discretionary Index (ASX: XDJ) 24% lower.

Now, there’s no guarantee these embattled sectors will transform their poor performance into gains in 2023. Particularly as many of the factors compressing them haven’t abated yet.

However, I personally expect them to recover their losses over the longer term.

I’ll be hunting for ASX 200 bargains in 2023

I’ll be taking a good look at many compressed real estate and consumer discretionary shares in the new year in a bid to find diamonds in the rough of the ASX 200 correction.

If I find a few that I believe could be future winners, I’ll aim to hold them for the next five to ten years, at least. Here’s why.

Historically, the market has always recovered from downturns and corrections to post new highs. Take the Dotcom bust, the Global Financial Crisis, and the COVID-19 downturn for example.

Indeed, the ASX 200 has gained more than 50% over the last 10 years despite this year’s market correction. If we also factor in dividends, the index returned an average of around 9.3% over the decade to 2021.

Thus, I hope to employ a combination of buying the dip and compounding gains by reinvesting dividends in a bid to realise above-market returns on the back of 2022’s correction over the coming decade.

Though, no investment is guaranteed to provide returns or downside protection and past performance isn’t an indication of future performance.

The post Stock market correction: A once-in-a-decade chance to get rich? appeared first on The Motley Fool Australia.

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More reading

• 2023 ready: Here are my non-negotiables for investing in ASX shares next year
• 5 things to watch on the ASX 200 on Friday
• Here are the top 10 ASX 200 shares today
• Here are the 3 most heavily traded ASX 200 shares on Thursday
• 3 reasons to buy Wesfarmers shares before 2023

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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