What Is a Market Correction?
A market correction is a fall of 10% to 20% from a recent high. It is a normal part of investing that happens fairly often.
Correction vs bear market vs crash
- Correction: down 10% to 20%.
- Bear market: down 20% or more.
- Crash: a very sudden, steep fall, often in days.
How often do corrections happen?
In US stocks, corrections have historically come along roughly every year or two on average. Many end within a few months and never turn into a bear market.
What to do in a correction
For long-term investors, usually very little. Selling after a drop locks in the loss. People who keep investing on a schedule through dollar-cost averaging buy more shares at lower prices.