Market Brief: Stock market dip advantage to some, hit to others |

Market Brief: Stock market dip advantage to some, hit to others

Allison Dyer Bluemel

A mix of caution and fear fueled a strong hit to the U.S. stock market Aug. 24 following economic upheaval in China the same day. However, as markets begin to rally, the dip could provide tentative opportunities for some investors.

U.S. markets took a big hit Aug. 24, but rallied last week to the relief of traders and investors.

However, concerns about how the slow down in China and what it means for demand in other markets across the world stayed strong in the minds of many.

"They are the largest emerging market economy in the world and the second largest economy overall behind the United States," said David Eads, certified financial planner at Colorado Financial Management in Loveland. "There are now concerns that they may not be able to maintain that high level of growth as they shift from a manufacturing-based economy to a more service-based economy."

Additionally, China's devaluation of its currency in mid-August undermined the progress made globally as the result of low interest rates following the global financial crisis.

The Chinese market instability is the largest threat to financial recovery since the financial crisis, David Joy, chief market strategist for Ameriprise Financial told CNN earlier this week.

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While some climbing in the U.S. market had been seen Wednesday from last week's low, the numbers of trades hit a low on the same day since the dip.

For short-term investors — those looking for a quick turnaround or looking to retire or cash out in the near future — now would not be the best time to enter the market, Eads said.

For those just entering the world of investing or looking for long-term investments to benefit from later in life, the dip could present cheaper, "on sale" stocks options in the U.S. market.

"Right now there are very mixed signals on the stock market's direction," he said. "Sentiment is very pessimistic, which can create buying opportunities."

These investors should remember there remains a chance the value of their stocks will decline again, Eads said.

"Young investors can take advantage of stock market corrections by purchasing stocks at lower prices and holding them over long periods of time (five years or longer)," he said.

One common strategy Eads recommends is dollar-cost-average investing, which involves buying stocks in bunches — such as once per week or once per month — instead of all at once.

That way, if the price dips lower after the first purchase, investors pay a lower average price. If it increases from the first purchase, they pay a higher one overall, but not as high as they would if buying all shares at once.

At Colorado Financial Management, Eads said they often purchase 1⁄6 of the security every six months.

The dip also may offer a break from what some outlets, such as CNN, have reported as being an over-valued or expensive stock market in the U.S. in its climb since the recession.

Furthermore, it's important to remember while growth has slowed in China, that isn't the same as the country experiencing a recession. The country is just growing at a slower rate than before, but it is indeed still growing.

Staff writer Allison Dyer Bluemel is The Windsor Now! finance reporter and columnist. Her column runs every other Sunday. If you have an idea for a column, call (970) 392-4467 or email Follow her on Twitter @alliemdb.

Dollar-Cost-Averaging Investing

Date Security Price Average Price Paid

July 15 $52.31 $52.31

Aug. 15 $44.92 $48.62

Sept. 15 $47.83 $48.35

Oct. 15 $51.09 $49.04

Nov. 15 $53.22 $49.87

Dec. 15 $49.16 $49.76

Average: $49.76