Making a million from shares looks difficult again. After a euphoric rally over recent weeks, the stock market has turned decidedly choppy.
But volatility is normal. It would have been surprising if there hadn’t been a pullback or correction after such a good run-up for many stocks.
Volatility can help with making a million from shares
And volatility can be your friend if you’re looking to buy shares. Dips and down-days can provide us with some decent opportunities to buy shares in great companies at lower prices.
However, as soon as there’s a set-back and shares weaken, it’s natural for fears to rise about the possibility of a second market crash. After all, we face a nasty recession in the real economy.
For what it’s worth, well-known US trader Mark Minervini tweeted yesterday: “Considering the extent of the recent rally, a pullback off the highs of 4% to 6% would be normal.” So he’s not forecasting a second crash.
But CNBC’s Mad Money presenter, Jim Cramer, said on the same day: “No broad-based rally from this level is sustainable without a major scientific breakthrough in the fight against Covid-19.” So he’s not predicting a crash either.
I’ve chosen those two quotes because my guess is that both commentators will prove to be about right with their assessments of the current situation. However, it’s worth noting that they’re referring to the general, overall market. Indeed, an index such as the FTSE 100, or maybe America’s S&P 500, could struggle to post more of the fast gains we’ve seen over the past few weeks, although we never know for sure!
It’s a stock-picker’s market
However, they both advocate trading and investing in selected shares. Indeed, the overall market may be flat or choppy, but some sectors and individual shares could still do well in the current environment.
And that’s always the case, even in bull markets. To have a good shot at making a million from the stock market, we’ve really got to become stock pickers. Happily, you’ve come to the right place if you believe the same. Here at the Motley Fool, you’ll find many people dedicated to investing and picking their own shares.
My three simple steps to boost the chances of making a million in this choppy stock market begin with Doing Your Own Research (DYOR). The aim for me is to identify good-quality businesses operating in strong market niches with decent trading records and strong finances.
Step two is to keep and maintain a watch list of the very best stocks I can find with the most compelling forward potential and opportunities to grow.
Step three is to buy shares in those businesses when the market offers a compelling valuation and the price makes sense of an investment. And some of the best times to buy can be when the general market is choppy or weak, such as now.
If you then hold onto your shares for a long time and reinvest along the way, you could be on course to compound your way towards a million.
Kevin Godbold has no position in any share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.