If you’re currently in the process of capital accumulation, you should be hoping for a market downturn. Yes, you read that correctly. A decline in market prices, often seen as a cause for concern by many, can actually present a golden opportunity for those looking to build wealth over time.

For long-term investors, particularly those still in the early stages of saving and accumulating capital, market pullbacks are not something to fear. Instead, they should be embraced. If you’ve carefully curated your investment portfolio, aligned with your long-term goals and risk tolerance, a market downturn provides a chance to buy quality assets at a discount, ultimately improving your overall returns.

Let’s break this down. When you first considered investing in a stock or bond, there was a price you were comfortable paying. Now, with a downturn, those same investments are available for a fraction of the original price. If you liked the idea of buying something at a certain price, you should love the idea of buying it for less. It’s a chance to accumulate more shares or units for the same amount of capital, setting you up for more substantial future gains when the market inevitably rebounds.

An Example: The 2020 COVID-19 Market Crash

Take, for example, the stock market crash that occurred in March 2020, triggered by the onset of the COVID-19 pandemic. During this time, global stock indices plummeted, and investors were faced with significant uncertainty. However, those who remained calm, focused on their long-term strategy, and bought into the market during this downturn were handsomely rewarded as the market recovered and surged to new highs within a year.

For instance, the S&P 500 dropped by around 34% from February to March 2020. Yet, by December 2020, it had fully recovered, and investors who capitalized on this downturn saw substantial gains. This is a classic example of how market declines, while uncomfortable in the short term, can offer excellent opportunities for long-term investors.

Who Should NOT Hope for a Market Downturn?

While market downturns are a boon for many investors, they are not universally beneficial. If you are not in the capital accumulation phase — that is, if you’re retired or relying on investments for income — the situation is different. For those in the capital annuity phase (where you rely on the returns from investments to cover living expenses), a market downturn can be more problematic. In such cases, strategies focused on preserving capital and generating income, rather than accumulating more, are key.

Similarly, if you do not have available funds to invest, or if you’re simply living paycheck to paycheck without any surplus to allocate toward investments, you should not be thinking about the market. Whether inflation is high or low, it’s essential to resist the temptation to “invest in liquidity” when your financial position doesn’t allow it. The key to success in investing is to have a solid financial foundation first — this means having enough cash on hand to weather personal emergencies and avoid selling investments in a downturn.

Lastly, for those who don’t have a clear financial plan or are simply following the market trends of the moment without understanding their personal goals, a downturn might indeed be a risk. Without a strategy or risk management plan in place, panic selling can occur, and a market correction can result in significant losses. A market downturn can expose weaknesses in a poorly thought-out investment approach.

Shifting Perspective: See Downturns as Opportunities

The important takeaway here is that market downturns, while they may induce short-term fear or anxiety, should be seen as opportunities to strengthen your financial future. For long-term investors, a downturn is an opportunity to buy into the market at a lower price, increasing your chances of superior long-term growth when the market inevitably rebounds.

Warren Buffett, one of the world’s most successful investors, famously said: “Be fearful when others are greedy, and greedy when others are fearful.” This is precisely the mindset you should adopt during market declines. While others may panic and sell off their holdings in fear of further declines, you can take advantage of lower prices to invest with confidence.

Conclusion

In conclusion, market downturns don’t have to be a cause for panic — for those in the accumulation phase, they represent a chance to strengthen your portfolio and position yourself for future success. As long as you have a solid, long-term financial plan in place, a temporary market decline can be seen not as a setback, but as a strategic opportunity. So, the next time the market dips, instead of worrying, consider it your chance to buy discounted investments that will pay off in the years to come.