The US market experienced yet another strange session overnight with the Nasdaq Composite (NASDAQ: .IXIC) falling by 2.41% while the S&P 500 Index (SP: .INX) fell only 0.54% and the Dow Jones Industrial Average Index (DJX: .DJI) closed 0.97% higher. The significant slump in tech and growth sectors could put pressure on ASX 200 tech shares.

Benchmark US government yields were once again in the spotlight, edging slightly higher to close at 1.60%. Yields have now more than tripled since August 2020 lows of 0.50%. 

Why do yields matter? 

Record-low and near-zero yields, or interest rates, have helped the stock market and the broader economy in a number of ways. 

Lower interest rates translate to lower borrowing costs, which can prop up economic activity. 

As interest rates get lower, investors must also take on more risk to maintain the same returns. It can therefore translate into a flow of funds from low-risk assets such as bonds, into higher-risk assets such as equities. 

Interest rates also impact the theoretical value of companies and their share prices. A company’s fair value is its projected future cash flows discounted to the present. If interest rates fall and everything else is held constant, the share price should rise. Conversely, if interest rates go higher, then share values should fall. 

Tech shares, many of which are not yet profitable, rely on more earnings in the future. Its rich valuation makes it more vulnerable to an increase in the yield used to discount its earnings. Whereas cyclical, or more value orientated shares such as financials, commodities and real estate tend to do better in high interest environments. 

The pressure is on for ASX 200 tech shares 

Yesterday, ASX 200 tech shares attempted to open higher but finished the session in the red. The S&P/ASX 200 Info Tech (INDEXASX: XIJ) opened as much as 3% higher on Monday, but closed 1.14% lower. 

Today, the tech index is down as much as 5%%, bringing its 5-day performance to -10.10% and 1-month performance to -21.03%.

Weighing down the index include ASX 200 tech share giants Afterpay Ltd (ASX: APT), which is down 10%, Xero Limited(ASX: XRO), down 7%, and Wisetech Global Ltd (ASX: WTC), which is down 4.3% at the time of writing.

Computershare Ltd (ASX: CPU) was the only large-cap that managed to open in the green and is currently up 2.80%. 

More reading

• ASX All Technology Index teetering on verge of a bear market
• 5 things to watch on the ASX 200 on Tuesday
• ASX 200 rises, TWE jumps, Zip sinks
• Where next for the Xero (ASX:XRO) share price?
• How the CSL (ASX:CSL) share price weakness exposes its dividend strength

Motley Fool contributor Kerry Sun 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 Bruce Jackson.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

What happened

Shares of Tesla (NASDAQ: TSLA) slid sharply on Monday, extending a bearish few weeks for the stock. It finished the day almost 6% lower.

The electric-car maker’s shares were likely down on Monday primarily due to a weakness in the overall market, particularly among tech stocks.

So what

Reflecting the tech stock sell-off on Monday, the tech-heavy Nasdaq Composite fell 2.4% even as the S&P 500, which is better diversified across other sectors, fell only 0.5%. Many growth stocks like Tesla fell even more sharply than the Nasdaq.

Monday’s market dynamics represented a continuation of a trend in recent weeks of tech stocks taking a breather after a big run higher in 2020. Tesla stock has been hit especially hard, declining more than 30% since mid-February. Year to date, it is now down more than 20%.

Now what

Investors should note that Tesla stock is still up about 300% over the past 12 months and 570% since the beginning of 2020. It’s not too surprising, therefore, to see the growth stock pulling back.

Growth stocks are generally more volatile than the overall market. Investors, therefore, should plan for more volatility from stocks like Tesla. On the other hand, shareholders should primarily remain focused on the company’s underlying business. On that note, management guided for its year-over-year vehicle delivery growth to accelerate this year compared to last year.

“We are planning to grow our manufacturing capacity as quickly as possible,” Tesla said in its fourth-quarter shareholder letter. “Over a multi-year horizon, we expect to achieve 50% average annual growth in vehicle deliveries. In some years we may grow faster, which we expect to be the case in 2021.” 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

More reading

• This was the week that ASX dividend shares proved their worth
• Why Tesla stock is stuck in reverse
• Shocking photo shows how quickly electric cars could take over
• Elon Musk doubles down on promise to IPO Starlink
• Why this ASX tech ETF is in the buy zone

Daniel Sparks has no position in any of the stocks mentioned. His clients may own shares of the companies mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Tesla. 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 Bruce Jackson.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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The Red 5 Ltd (ASX: RED) share price is soaring higher today following the announcement of possible contract negotiations with Macmahon Holdings Limited (ASX: MAH). At the time of writing, the gold producer’s shares are up 5.8% to 18 cents.

What’s driving the Red 5 share price higher?

The Red 5 share price is on the rise after providing investors with a positive update this morning.

According to its release, Red 5 advised it has signed a letter of intent with Macmahon for mining contract services at its King of the Hills (KOTH) Gold Project. This follows an in-depth tender process that saw a number of contracting companies compete for Red 5’s open pit and underground mining activities.

Pending the final agreed terms, the proposed contract will run for an initial 5-year period beginning in the March quarter of 2022. Formal documentation of the contract is expected to be completed in the June quarter of this year.

Macmahon estimates that the award will generate revenue over $650 million over the life of the deal.

In addition, Red 5 will appoint experienced mining engineer Andrew McRae as the KOTH mine manager. McRae has held senior management roles within the industry over the past 10 years. Most notably, he served in the leadership team at Evolution Mining Ltd (ASX: EVN)’s Cowal Gold Mine.

Quick take on the KOTH Gold Project

Wholly-owned by Red 5, the KOTH Gold Project is situated within the Eastern Goldfields region of Western Australia. The gold mine has a 16-year mine life, with over 2.4 million ounces of ore reserve, and 4.1 million ounces of mineral resource. The large open pit and underground mine is expected to have its first gold pour in the June quarter of 2022.

Words from the managing director

Red 5 managing director Mark Williams touched on the contract award, and the inclusion of its new KOTH mine manager:

Following a rigorous tender process, we are delighted that, subject to final agreed contract terms, Macmahon will be appointed as mining contractor for both the KOTH open pit and underground mines. We see a number of important operational efficiencies and cost benefits in having both mining operations managed by a single contractor.

We are also very pleased to welcome Andrew McRae to the Red 5 team as the KOTH Mine Manager. Andrew brings a wealth of experience and knowledge from his time at the Cowal Gold Mine and he will play a key role in planning and preparations to ensure we remain on commencing activities at the KOTH Gold Mine in early 2022.

The Red 5 share price has fallen 40% over the past 12-month period.

More reading

• 5 things to watch on the ASX 200 on Tuesday
• ASX 200 Weekly Wrap: ASX finishes higher, despite tech selloff
• Why the Red 5 (ASX:RED) share price is lifting 6% today
• ASX 200 rises, Rio chair will leave, Nine gets a new CEO
• Why the St Barbara (ASX:SBM) share price will be on watch today

Motley Fool contributor Aaron Teboneras 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 Bruce Jackson.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Back in the last century — which was only 21 years ago — there were limited opportunities for women to learn about investing in the stock market. Many women who were children in the 1950s and ’60s grew up believing that a woman’s place was in the home. No financial education was offered in schools, and young girls were thrown into home economics and sewing classes, while boys attended woodworking or electrical classes — to prepare them for, well, making a living and supporting a family.

But things have changed, thank goodness. Women have claimed full equality, and even though they still earn less per hour than men, they can be seen in high-profile jobs like CEO, financial advisor, and even vice president of the United States.

Unfortunately, things haven’t changed much in the financial realm. Considering that 90% of women will have to manage their own assets at some point, it’s surprising that they don’t feel comfortable when it comes to investing. And only 39% of women feel they have the resources for a 25-year retirement, while the other 60% are worried sick about it.

It’s time for women to claim their power when it comes to investing. And if you’ve been reluctant or frightened about the stock market, it’s time to change. Following are four steps that can make you a better investor.

Make a financial plan

Everyone needs a guide on the path to financial security. But 59% of women don’t have a plan. Instead, they estimate what their retirement needs will be. That’s a recipe for disaster — if you don’t know how much to save, where to put your savings, and how to grow them, you run the risk of falling short of funds in retirement — and that will cause anxiety and worry.

Instead, be real about your future. Find a financial advisor you trust and sit down and run some numbers. There are many advisors out there — many of whom are female, if that makes you more comfortable — who are happy to give you a free introductory session to show you where you are now financially and where you need to go to make enough for retirement. Yes, it may also include a sales pitch to get your business, but you can say no, or “I’ll think about it.” Just go for the free information. Or make an appointment with a fee-based financial planner who will focus entirely on you and avoid the sales pitch.

At the very least, there’s an abundance of articles like this retirement primer on the internet that you can read if you’re the do-it-yourself type. Once you have a plan, you’ll have a guideline to help you decide the exact type of investments you’ll need to reach your goals.

Make investing a priority

According to Morningstar, women placed investing fifth on their list of priorities, following daily living expenses, paying off debts, housing costs, and savings. No wonder it gets no love! By the time a woman handles those four other items, she has no energy left to spend on growing wealth in the stock market.

If you want to be a better investor, you must give it a higher priority. Set aside an hour or two each week to learn about it or review the stocks or funds you currently own. And don’t make those hours subservient to other household business. Your financial life is extremely important, so treat it that way.

Be a little risky

Almost every study out there indicates that women don’t like to take risks with their money. They tend to keep too high a percentage in cash, money market accounts, CDs, and Treasury bills. And according to BlackRock, only 21% of women invest in stocks.

But to make money that’s going to fund your retirement, you have to take a little risk. Just a little to start, OK?

Maybe you could be slightly more aggressive in your 401(k) [superannuation] allocations. Put a higher percentage in an S&P 500 index fund, which most workplace plans offer. The long-term average return of the S&P 500 is around 10% — which is a lot more profitable than the 1% to 2% you’ll earn from cash and CDs. Or take a small stock position in a company that you think has a great future. In any case, you need to take on some risk to generate enough for a comfortable retirement.

Get confident about managing your money

These days, women are earning a majority of doctorates and master’s degrees, and 60% of college students in the U.S. are women. We are intelligent and capable — so why aren’t we confident when it comes to money?

Education is key — and you can become knowledgeable about investing just as you learned how to do everything else in your life that you’re successful at. Don’t know where to start? Read The Motley Fool’s 13 Steps to Investing Foolishly. The more you learn, the more confidence you’ll have, and the stock market will become more a place of fun and less a place of fear.

Time to start learning

Here’s where your investing confidence and education will get you: Many studies show that women who invest far outperform men. They trade less often and take a longer time to make decisions, traits that make successful long-term investors.

Women have achieved so much. They’re college graduates, they’ve earned higher degrees, and they run major corporations, birth children, and take care of their parents. Some even run the House of Representatives, serve on the Supreme Court, and are next in line to be president of the United States. If women can do all that, they can certainly become better investors. Just take the time to learn, take on a little risk, and persevere. And remember, when you feel cold feet coming on… you CAN succeed at investing!

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

More reading

• Here’s why the Galaxy (ASX:GXY) share price is pushing higher today
• Why the AVZ Minerals (ASX:AVZ) share price is surging 15% higher today
• ASX All Technology Index teetering on verge of a bear market
• Why the Irongate (ASX:IAP) share price will be on watch today
• Why the Western Areas (ASX:WSA) share price is in a trading halt

Barbara Eisner Bayer 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 Bruce Jackson.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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The Galaxy Resources Limited (ASX: GXY) share price is pushing higher on Tuesday morning.

At the time of writing, the lithium producer’s shares are up 2% to $2.28.

Why is the Galaxy share price pushing higher?

Investors have been buying Galaxy shares this morning following the release of an update on its James Bay Lithium Mine Project in Québec, Canada.

According to the release, the Preliminary Economic Assessment (PEA) for the project is complete. That assessment found that the project is a viable, near-term supplier of spodumene to feed the emerging electric vehicle value chains in North America and Europe.

Management estimates that the project will deliver average annual production of 330,000 tonnes of spodumene concentrate over an ~18-year mine life.

It expects to achieve this with a cash operating cost (FOB Montreal) of US$290 per tonne of concentrate. Management notes that this will position James Bay competitively.

In light of the above, the company estimates that the project has a pre-tax net present value (NPV) of US$560 million at an 8% discount rate. It also anticipates a pre-tax Internal Rate of Return (IRR) of 39.6%, with a payback period of 2.2 years.

As a result of this, Galaxy will now advance the project directly into the basic engineering phase. The full capital cost of the project is estimated to be US$244 million.

Galaxy also revealed that it plans to integrate James Bay with a downstream lithium chemicals facility. Discussions with a number of prospective partners will be advanced following the release of the PEA.

Management commentary

Galaxy’s Chief Executive Officer, Simon Hay, was pleased with the PEA. He commented:

“Galaxy is pleased to release the PEA outcomes for James Bay which clearly demonstrate that the Project is a viable, near-term supplier of spodumene to feed the emerging electric vehicle value chains in North America and Europe. Our skills and experience in developing and operating Mt Cattlin have been utilised to optimise the James Bay design. As a result, the Project is a low-cost operation and will sit in the lowest quartile regionally for capital intensity and operating costs.”

“Galaxy intends to develop James Bay as a fully integrated project and the release of the upstream PEA is a major milestone in our engagement with potential downstream owners and suppliers. Forecast financial outcomes are compelling and with downstream facilities needing to secure long-term spodumene supply from reliable and proven miners Galaxy is confident that the James Bay project will be highly attractive, particularly to North American and European value chain participants.”

“We have immediately commenced the basic engineering phase. First production is targeted for early 2024 as electric vehicle penetration rates increase and the forecast demand for lithium in the region accelerates.”

Following today’s gain, the Galaxy share price is now up 200% over the last 12 months.

More reading

• Why this broker is bullish about ASX lithium shares
• Morgan Stanley reveals some investment trends to watch in 2021
• ASX lithium shares to get price shock as commodities supercycle charges up
• Orocobre (ASX:ORE) share price dives despite a recovery in lithium markets
• Why the Galaxy Resources (ASX:GXY) share price is tumbling lower today

Motley Fool contributor James Mickleboro owns shares of Galaxy Resources Limited. 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 Bruce Jackson.

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The AVZ Minerals Ltd (ASX: AVZ) share price has returned from its trading halt and is storming higher.

In morning trade on Tuesday, the lithium-focused mineral exploration company’s shares are up 15% to 23 cents.

Why is the AVZ Minerals share price storming higher?

Investors have been buying AVZ Minerals shares this morning following the release of a positive announcement.

According to the release, the company has secured a second strategic, long-term offtake partner with Shenzhen Chengxin Lithium Group (Chengxin).

Chengxin is a leading China-based battery materials producer that is continuing to expand its lithium hydroxide production capacity.

It is aiming to become one of the largest lithium hydroxide producers in China, with initial production capacity of up to 25,000 tonnes of lithium carbonate and 15,000 tonnes of lithium hydroxide.

And with future staged expansions expected to increase Chengxin’s production to approximately 70,000 tonnes per annum, it will require approximately 560,000 tonnes per annum of spodumene concentrate (SC6) to satisfy its internal demands.

What is today’s agreement?

The release explains that the two parties have signed a binding offtake agreement for the supply of SC6 from the Manono Lithium and Tin Project.

Chengxin has agreed to purchase up to 180,000 tonnes per annum of SC6 for an initial three-year term following commencement of production. The agreement includes extension options.

Pricing will be determined by a formula which references various published market prices of lithium carbonate and lithium hydroxide products and underpinned by an agreed floor price.

AVZ’s Managing Director, Nigel Ferguson, said: “We are very pleased to conclude our discussions with Chengxin and to sign our second lithium offtake agreement. This agreement takes offtake commitments to more than 50% of the Manono Project’s initial saleable SC6 production, which is a massive endorsement for our project.”

“We are well advanced with our other offtake discussions, not only for our lithium products but also for our tin and tantalum materials. These will be pursued diligently over the coming weeks and I look forward to updating the market once these agreements are finalised,” he concluded.

The AVZ Minerals share price is now up 280% since this time last year.

More reading

• ASX All Technology Index teetering on verge of a bear market
• Why the Irongate (ASX:IAP) share price will be on watch today
• Why the Western Areas (ASX:WSA) share price is in a trading halt
• How to reinvest when terrified
• 3 mistakes passive income investors can make when investing in dividend stocks

Motley Fool contributor James Mickleboro 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 Bruce Jackson.

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Risk appetite may be strong but the ASX index holding our most popular technology shares is at risk of collapsing into a bear market.

What a difference a month makes! The S&P ASX ALL TECHNOLOGY (INDEXASX: XTX) hit a high on 10 February this year and has crashed by around 17%.

The technical definition of a bear market is a peak-to-trough drop of 20% or more. It won’t take much for ASX tech shares to reach that dubious milestone.

ASX tech shares in bear territory

Some of the biggest culprits dragging on the index are among the best loved ASX tech shares. These include the Afterpay Ltd (ASX: APT) share price, Appen Ltd (ASX: APX) share price, ELMO Software Ltd (ASX: ELO) share price and Bigtincan Holdings Ltd (ASX: BTH) share price – just to name a few.

These shares have shed at least a quarter of their value over the past month and some believe there’s more pain to come for the sector.

In contrast, the S&P/ASX 200 Index (Index:^AXJO) dipped less than 2% over the same period.

Tech shares crumble on NASDAQ and ASX

The widening gap between ASX tech shares and the broader market isn’t unique to Australia. The Nasdaq-100 (INDEXNASDAQ: NDX) crashed nearly 3% last night and is down more than 10% from its high.

This officially puts the US tech index in correction territory, and all this is happening as the Dow Jones Industrial Average (INDEXDJX: .DJI) closed in on a record last night.

This is the first time since 1993 that the Dow Jones rose and closed within 1% of an all-time high while the Nasdaq-100 fell more than 10% from its peak, reported Bloomberg.

Tech tailwinds are waning

Tech shares in Australia and the US have been big winners from the COVID-19 global pandemic as they benefitted from changes in lifestyles.

Companies that helped us work from home or were leveraged to online shopping have soared through 2020.

But it isn’t only receding risks of further lockdowns and the expected return to normality that is weighing on tech darlings.

Why tech shares are getting short-circuited

Signs of accelerating global economic growth and inflation are pushing up bond yields – and that’s hitting tech shares the hardest.

This is because tech shares are trading on very high valuations. Investors are happy to grit their teeth and buy these expensive names when uber-low rates extend for as far as the eye can see.

But the instance we get a whiff of rising rates, investors are likely to scramble to stocks that offer value or growth at a reasonable price (GARP).

In this environment, it’s difficult to see what nearer-term catalysts could turn the tide for our ASX tech sector.

More reading

• 5 things to watch on the ASX 200 on Tuesday
• ASX 200 rises, TWE jumps, Zip sinks
• How the CSL (ASX:CSL) share price weakness exposes its dividend strength
• Aristocrat (ASX:ALL) share price surges as it finds a sweet spot
• ASX 200 up 1.6%: Appen rebounds, ALS acquires Investiga, Woolworths upgraded

Brendon Lau has no position in any of the stocks mentioned. Connect with me on Twitter @brenlau.

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends BIGTINCAN FPO and Elmo Software. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of AFTERPAY T FPO and Appen Ltd. The Motley Fool Australia has recommended BIGTINCAN FPO and Elmo Software. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Irongate Group (ASX: IAP) share price will be on watch today following the acquisition of an industrial property. The announcement was made after market close yesterday and could have an effect on its shares today.

The diversified real estate investment trust ended Monday’s trading session 1.1% down to $1.26.

Irongate share price in focus

The Irongate share price could be on the move today as investors had time to digest the latest release overnight.

In its announcement, Irongate advised that it has entered a contract for sale of land to acquire an industrial facility.

Under the agreement, Irongate will pay a total amount of $24.75 million to the vendors of the property. The purchase consideration and transaction costs will be funded by the company tapping into its existing debt facility.

Built in 2018, the industrial complex is located on Main Beach Road in Pinkenba, Queensland. The building comprises 1,852 square meters of office and warehouse space and 33,165 square meters of paved areas for vehicles. Currently, the property is tenanted to Grays, which is the largest industrial, auto and commercial eCommerce business in Australia. The lease expires in March 2028 and has a fixed annual increase of 3.5%.

The settlement date for the acquisition of the property is expected to occur on 22 March 2021.

What did the CEO say?

Irongate CEO Graeme Katz touched on the deal, saying:

The Property provides IAP with a strategic land holding of almost four-hectares in the Australian Trade Coast Precinct, one of Brisbane’s premier industrial locations. Pinkenba is immediately adjacent to Brisbane Airport and the area will benefit from infrastructure upgrades associated with the new Brisbane International Cruise Terminal.

We believe the Brisbane industrial sector currently offers relative value and the acquisition will increase IAP’s exposure to industrial property to 32% by both income and value.

The Irongate share price is down just over 10% in the last 12-month period.

More reading

• 2 small ASX dividend shares with big yields

Motley Fool contributor Aaron Teboneras 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 Bruce Jackson.

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The Western Areas Ltd (ASX: WSA) share price won’t be going anywhere on Tuesday.

This morning the nickel producer requested a trading halt so that it could launch an equity raising.

What did Western Areas announce?

Western Areas announced that it is aiming to raise a total of $100 million to complete the Odysseus development, advance organic growth projects at Forrestania and Cosmos, and continue exploration.

According to the release, this equity raising comprises a fully underwritten placement to raise $85 million and a non-underwritten share purchase plan to raise up to $15 million.

Western Areas is raising the funds at a floor price of $2.15 per new share, which represents an 8.1% discount to its last close price of $2.34.

Why is Western Areas raising funds?

Management plans to use the proceeds from the equity raising predominantly to fund the mine development capital expenditure at Odysseus.

Development at the operation is progressing on schedule and the first concentrate production is targeted for mid FY 2023.

Once Odysseus is in steady state production, delivery of 14.6kt of nickel in concentrate per annum is expected from the operation.

In addition, some of the proceeds will be used to help advance Western Areas’ targeted drilling campaign on its portfolio of exploration assets. These include Western Gawler, Metal Hawk, and Forrestania.

Western Areas’ Managing Director, Dan Lougher, commented: “The Placement supports the development of the Odysseus underground mine which is progressing well with excellent advance rates being achieved while also providing funding for Western Areas’ exploration portfolio where we hope to make significant progress in 2021. With greater balance sheet flexibility, the Company will be able to take advantage of opportunities within the portfolio and maximise returns to our shareholders.”

The Western Areas share price is expected to return to trade on Wednesday following the completion of the bookbuild process.

More reading

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• Why the Western Areas (ASX:WSA) share price is crashing 10% lower
• These are the 10 most shorted shares on the ASX
• These are the 10 most shorted shares on the ASX

Motley Fool contributor James Mickleboro 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 Bruce Jackson.

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The share market has stalled recently, especially for growth shares that led the spectacular bull run after the COVID-19 crash last year. 

The S&P/ASX All Technology Index (INDEXASX: XTX), which includes so many of the growth darlings of 2020, has sunk almost 16% in the past 3 weeks.

But experts warn that in down times like this, it’s critical investors don’t go in their shell.

In fact, a depressed market is the best time to buy stocks — since prices are lower and the upside is greater.

Collins St Value Fund managing director Michael Goldberg posted last month on Livewire that 90% of returns are made in just 5% of trading days.

“Extreme conditions create the most attractive investing opportunities.”

Don’t fall victim to ‘terminal paralysis’

Legendary investor and GMO co-founder Jeremy Grantham once wrote a letter to investors in March 2009 — in the middle of the global financial crisis crash.

He said many investors would liquidate to sit on a pile of cash in such times.

“As this crisis climaxes, formerly reasonable people will start to predict the end of the world, armed with plenty of terrifying and accurate data that will serve to reinforce the wisdom of your caution.” 

But then even as the actual crisis passes, according to Grantham, “terminal paralysis” can grip the market.

“Those who were over-invested will be catatonic and just sit and pray. Those few who look brilliant, oozing cash, will not want to easily give up their brilliance,” he said.

“So almost everyone is watching and waiting with their inertia beginning to set like concrete.”

But it always becomes obvious in retrospect that those with a big pile of cash will miss out on the market recovery.

“There is only one cure for terminal paralysis: you absolutely must have a battle plan for reinvestment and stick to it,” said Grantham.

How to buy shares in a depressed market

The first and last thing every stock expert tells retail investors is that no one can perfectly time the market.

Grantham is no different.

“Remember that you will never catch the low,” he said.

“Since every action must overcome paralysis, what I recommend is a few large steps, not many small ones. A single giant step at the low would be nice, but without holding a signed contract with the devil, several big moves would be safer.”

Forager research analyst Chloe Stokes told The Motley Fool last month that every investor should have a “wishlist” of shares they would buy if their prices came down. 

“It might seem like a waste of time, but you never know when the opportunity could come along to own a high-quality business at a more than reasonable price,” she said.

“I wouldn’t want to miss out on owning some of my favourite businesses if the opportunity presents itself again.”

Grantham said much the same in his 2009 letter.

“A simple, clear battle plan – even if it comes directly from your stomach – will be far better in a meltdown than none at all.”

The S&P ASX All Technology Index rose more than 93% in about 5 months after the COVID-19 crash.

There are plenty of other examples of post-correction rallies.

“In June 1933, long before all the banks had failed or unemployment had peaked, the S&P rallied 105% in 6 months. Similarly, in 1974 it rallied 148% in 5 months in the UK!” said Grantham.

“How would you have felt then with your large and beloved cash reserves?”

He added that the market doesn’t start rallying when it sees light at the end of the tunnel.

“It turns when all looks black, but just a subtle shade less black than the day before.”

More reading

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• 3 mistakes passive income investors can make when investing in dividend stocks
• The ASX share dividend growth record belongs to Soul Patts (ASX:SOL)
• 3 fantastic ASX growth shares to buy in March
• Subreddit ASX Bets is gambling these 4 ASX shares will follow in GameStop’s footsteps

Motley Fool contributor Tony Yoo 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 Bruce Jackson.

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