Market Correction Makes Stocks More Attractive

So what words are left to describe a really big down day like Thursday? How about, "Stocks became a better bargain than ever!"

Isn't it true? Isn't it all a matter of perspective? If you already had all your money in stocks, then of course you're sorry to see prices fall — especially after a day like Thursday.

But if you have cash in your pocket and you'd like to buy stocks for the long run, or add to an existing portfolio, then Thursday was a home run. Your world just got a lot sweeter.

Same thing with home prices. If you're looking to buy, the so-called collapse of the so-called housing bubble is great news. Your dream home just went on sale! Attention all you Kmart shoppers.

Then again, all of this depends on an important assumption: You have to believe that the decline in prices is temporary. You have to believe that it doesn't reflect some kind of horrible permanent change in the economic environment.

For example, the stock-market crash of 1929 turned out to be no bargain. If you'd bought stocks at the end of that disastrous October, you would've had to endure terrible declines in value during the Great Depression, not making a sustainable profit on your investment until 1943, according to data from Ibbotson Associates.

But the stock-market crash of October 1987 was a very different story. The market decline then was far worse and much scarier than the one that ushered in the Depression more than half a century earlier. And, it turned out, much more of a bargain. Had you bought stocks at that month's end, you would've shown a profit after just three months.

So don't be afraid just because you see stocks slide, plummet or collapse. Not even if you see them get nuked, trash-compacted, reamed, steamed or dry-cleaned.

Don't just look at prices, and for heaven's sake don't let yourself be stampeded by the overheated language of the media. Ask yourself as objectively as possible, "Why?"

If the answer to that question is that the world really is getting a lot worse, then step aside as a buyer or consider selling before things really do get worse. But I've learned that usually the world isn't getting anywhere near as worse as the stench of panic in the air would make you believe.

Remember, even if the world is getting worse, you'd still want to be a buyer of stocks provided that their prices fell enough to more than compensate for the deteriorating backdrop.

I'm sure I'll get plenty of emails accusing me of being a perma-bull. Especially from perma-bears who've been so terribly wrong for so terribly long. A day like Thursday is a great relief for these people, who can myopically convince themselves they've been right all along.