What is a Stock Market Correction?

What is a stock market correction?

Dear Mr. Market:

Today we’re going to talk all about you and how you whipsaw investors into panic with stock market corrections. What exactly is a correction anyway?

To some this sounds like a simple question; to others, and judging on how they act with their investing decisions, it’s clearly not.

By definition a bear market is one that has stock prices falling by 20% or more and lasts for at least two months. A stock market correction is much shorter and is typically fast in nature. Corrections often come on the heels of investor pessimism or after a bearish story that later is found to be a relatively meaningless event. In other words, corrections bring a whole different sort of emotion to the game than a bear market.

What’s interesting to know about corrections is that they occur Continue reading