It was a dramatic week in the markets – and it can be much more. Uncertain stock markets can sometimes be a great place to hunt for occasions. This helps to explain why I maintain a list of shares to buy if the rocky market reduces its price to an attractive level.

But when doing this, I try to remember some essential rules.

A massive decrease in price does not necessarily equal to the opportunity

When the market falls and the price of the shares drops sharply, it may be tempting to think that it must have some value.

However, in reality, only because the price of the action falls a long way, does not necessarily make it an opportunity.

Instead of comparing the cost of participation now with what he once was, I think that it is more sensible to compare it with what I think is worth on the basis of future commercial perspectives.

Some actions are fallen and do not come back

In Dotcom Boom in 1999-2000, British technology and service provider seller Componentter He rose, then crashed.

He returned to the previous price – but it took it Two decades Do it!

Other actions are occupied on a turbulent market and never return to their previous price.

It can be tempting to think that the rocky market is having most of the actions, so when the wave turns most, the majority will come back.

In fact, this is not necessarily true.

It matters whether the cause of the disaster directly affects the company or not – and whether it has financial resources to bring a storm.

When I am looking for shares to buy among current market turbulences, one question I asked myself, while considering the valuation of companies such as Nvidia It is whether their long -term business value has probably been reduced or not.

Irrational markets still require rational thinking

When the market behaves in a strange way, some investors do the same.

Perhaps the price of shares has become so seemingly convincing that they forget about the essential principle of risk management of diversification and put the disproportionate amount of their money for one investment.

It can be a costly mistake when the market is serene – and also when it is not.

To take Record (LSE: RKT) as an example.

During the last market disaster, after the beginning of the pandemic, the investor could decide that there was money for hygiene products.

Reckitt has reserved preparations, such robust brands Lysoldeep experience and world distribution network.

However, over the past five years, the price of shares has dropped by 16%.

It is bad enough, but it is even worse compared to FTSE 100 Index that Reckitt is an ingredient. The index increased by 50% in the same period.

Some of the problems faced by Reckaitt, like the processes related to nutritional activities, were not necessarily obvious five years ago.

But that’s what it’s all about! Even an excellent company may encounter unforeseen problems.

So, no matter how tempting a specific share may seem when the rugged markets significantly reduce their price, an experienced investor always remains properly diverse.