I bet almost everybody has heard the real estate industry talk about it being a buyer’s market or a seller’s market in real estate. But what does this actually mean?

Simply put, if there are lots of people who need/want to buy a home but fewer people interested in selling their homes there ends up being not enough homes available, so prices start to increase. This favours the sellers and therefore, this is what is called a seller’s market. Of course, there are always more factors involved, but for the most part it is a simple supply/demand formula.

So, opposing the above, when there are more interested sellers and fewer interested buyers, the supply/demand favours the buyers, so Voila! We have just revealed the secret of a buyer’s market.

When we use the same understanding and relate it to the stock market/mutual fund world, we have been experiencing the same type phenomenon where there are more interested sellers and fewer interested buyers. Oftentimes this activity is created by investors who view the stock market as a short term investment playground, rather than a longer term investment strategy. Short term thinking is affected by economic news, world politics, and any type of “bad news” that circulates and puts fear into one’s emotional psyche. Let’s call them the sellers. But the long term investors realize that when they invest in quality businesses, they continue to enjoy the dividends and growth that follow all good businesses over the long haul (i.e. when the stock market declines in value, we all still use the banks, utilities companies and we all still buy groceries). So these long term thinkers, including professional money managers, are quite happy when there is a stock market correction to enable them to use their cash holdings to buy good quality investments at a discount (due to lower stock market values). Today, long term investors are excited and buyers of additional investments.

I can assure you that good quality investment management is currently acting in your best interests by taking advantage of the buyers’ market currently on display. So I suggest that if your personal circumstances have not changed since your last visit with your financial advisor, please feel confident to maintain your investments and if you have more money to invest for the long term, the time to do it is when stock markets are in decline. That’s right; as long as prices remain lower for now, we are in a buyers’ market.