Here's how I can use the next stock market correction to try and aim for a million — for £30K

When the stock market falls, that may seem like bad news for investors.

However, the truth is that a falling stock market can be bad or good depending on how one reacts to it. For the canny investor, a stock market correction or crash can provide an opportunity to buy great companies at a cheaper price than before.

Meanwhile, the stock market continues to perform well. The UK flagship FTSE 100 The index reached a record high this year. It is currently about 2% below the all-time closing.

But sooner or later, as history shows us, there will be a stock market correction. Here's how I would use that to try and turn £30k into a portfolio worth a cool million pounds down the line.

Using weak prices

Assume that I invest in a portfolio of stocks that, on average, grow in price at 5% per year and have a dividend yield of 7%. That equates to a 12% compounded annual return.

Now imagine that a stock market correction sees that stock selection drop by 15%. If I bought then, that 5% annual price gain would end up being a 5.75% annual price gain because of my lower purchase price.

At that time, the average dividend yield will not be 7% but 8.05%, again due to my low purchase price. So my annual compounded price gain would be 13.8%.

This is where the long-term benefit of consolidation really shines. Compounding £30k at 12% a year, my portfolio will be over a million pounds after 31 years. At the top rate of 13.8%, however, hitting the million pound mark will take 28 years.

Preparing now to hunt for bargains in the future

Remember, this example assumes I spend the same amount buying the same stocks. The only difference between the two situations is that in one I buy before the 15% price drop and in the other, after. In a stock market correction, some stocks can fall more than that, which gives me more opportunity to find deals.

But just because a share is falling doesn't mean it's cheap.

I still need to focus on quality – and during the market downturn I may not have enough time to do research. That's why I'm updating my sharing watch list nowto be ready to go when the next stock market correction comes.

One word in it is IM&G (LSE: MNG).

During the stock market crash of 2020, M&G's share price fell sharply. If I buy it today, I can earn an already liquid yield of 9.5%. But if I had gotten the share at its low in 2020, I would now be getting a yield of over 18% per year!

With a customer base in the millions, continued strong demand for inventory management, and a strong brand, I think the company is set up for continued success. Another concern is what the company is charging this month “up” geopolitical risk that threatens economic stability and investor confidence.

But, if the next stock market correction allows me to pick up more M&G shares at a lower price, I plan to do so!