Markets experience both different levels of downturns. Knowing the difference helps investors avoid panic.
**Market corrections**
– Defined as a 10–20% decline from recent highs.
– Often last weeks to months.
– Examples: S&P 500 corrections in 2011, 2018, mediaalpha stock and 2022.
**Market crashes**
– Rare but destructive.
– Can lead to recessions.
– Examples: 1929 Great Depression, 1987 Black Monday, 2008 crisis, 2020 COVID crash.
**How investors should react**
– Often best to hold or buy more.
– In crashes: preserve capital, rebalance portfolios.
**Key differences**
– Corrections are short and healthy.
– Corrections reset markets.
– Corrections happen often.
**Conclusion**
Corrections and crashes are part of market cycles. By understanding them, investors position for recovery and growth.
