Market Corrections

THE FACTS:

They are swift and visceral.

They come without warning.

Their length of stay is unknown.

They are not pleasant when they are around.

They leave scars on those who react poorly.

They are temporary and necessary.

They are vital to the long-term return.

They are essential to the health of a long-term bull market.

Corrections come upon us from time to time and are vital to the long-term health of the market. 

No one knows when corrections will come or go, but it’s important to know how to react when they’re here. 

They force us to go against our behavioral nature and endure them. Our gut tells us to do something when they show up, yet the best reaction is to stay patient, stay invested, or even invest money when they occur.

History shows us that, on average, we get a 10% market drawdown once per year, a 15% drawdown once every three years, and every five years or so we enter a bear market with a 20% drawdown. This is how it is, has been, and will be. 

To the long-term, educated investor these are opportunities that could allow them to achieve superior long-term returns.