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StockCram is not a broker-dealer, investment adviser, or financial institution. All content is for educational and informational purposes only and should not be construed as personalized investment advice. Consult a qualified financial professional before making investment decisions. Past performance does not guarantee future results.Simple Definition
A 10%+ drop in stock prices. Normal and healthy for markets.
Why It Matters
Corrections are normal - they happen about once a year on average. Since 1950, the S&P 500 has had a correction roughly every 12 months. They're the market's way of cooling off after getting too hot. Panic-selling during corrections is how average investors destroy their returns. The market has recovered from every single correction in history.
Key Points
- 10-20% drop = correction; 20%+ drop = bear market; 30%+ sudden drop = crash
- Average correction lasts about 4 months from peak to recovery
- Corrections often create buying opportunities - you're getting stocks 'on sale'
Related Terms
Common Questions
A 10%+ drop in stock prices. Normal and healthy for markets. Corrections are normal - they happen about once a year on average. Since 1950, the S&P 500 has had a correction roughly every 12 months.
Corrections are normal - they happen about once a year on average. Since 1950, the S&P 500 has had a correction roughly every 12 months. They're the market's way of cooling off after getting too hot. Panic-selling during corrections is how average investors destroy their returns. The market has recovered from every single correction in history.
10-20% drop = correction; 20%+ drop = bear market; 30%+ sudden drop = crash
Average correction lasts about 4 months from peak to recovery
Corrections often create buying opportunities - you're getting stocks 'on sale'