Financially Speaking Podcast

Whew! Glad that's over with...

Published on August 21, 2015

It seems that we may be in the midst of a good ole stock market correction.  A correction is when a stock market index loses 10% or of its value from the peak. As of this morning, the Dow Jones and the S&P 500 are approaching correction status for large company stocks, while the Russell 2000 is very close for small company stocks.The environment is ripe for fear to trigger irrational investor behavior. 

There is nothing unusual about this correction except that it is very late in coming.  The last correction was in 2011, about four years ago.  Depending on which stock index you consider, corrections occur about every year or so.   Corrections usually last a few months; and then the stock market gets back on track, eventually hitting new highs. Because it has been quite some time since our last correction, this one feels worse, but it is the same.

How should we respond to short-term stock market volatility? Remember that the stock market affects only part of your portfolio-you have a diversified investment strategy.  And no one can predict when market corrections occur or how long they will last. It is hard to struggle with uncertainty, but rational investors will do nothing or will buy more stocks.  On average, stocks gain about 32% in the year following a correction.

Corrections are like tornadoes.  We not surprised when we have one, but we have to think a little while to remember the last one. And everyone knows that there is a clear sky after a tornado. This correction will pass just like all the others have since you were born.

Tags: stock market corrections

« Back to Blog



Britain don't panic elder fraud; elder financial abuse employee retirement plans fiduciary adviser; fiduciary capacity financial advisor; stock broker financial decisions; 401k investment decisions inflation interest rates investing Investing 101 investment beliefs; reality of investing investment commissions; investment authority; investor awareness investment decisions; investor behavior investment litigation; investment arbitration; investment advice investment philosophy; investment belief system; investment decisions investment portfolio; rebalance portfolio; investment strategy; investment risk management investment predictions; long-term investing; holding on to losing stocks nor'easter normal growth cycle retirement decisions; retirement funds; longevity; life expectancy risk tolerance stock market stock market crisis; investing stock market; investing stock market; rising interest rates volatility Yellen

RSS Feed

Subscribe by Email

Enter your email address:

Delivered by FeedBurner

Sign Up for Our E-News

* indicates required