What is a stock market correction?
And why you shouldn’t worry about them.
Stock market corrections and the media
It is also important not to get too emotionally invested in the stories and narratives you’ll hear when a correction occurs. Individual and institutional investors buy and sell for a wide range of reasons. When there are more sellers than buyers, the market goes down, and when that dynamic is reversed, the market goes up. But that doesn’t make for good copy or soundbites, so the financial media will often tie events and news stories to corrections to try and demonstrate “cause and effect.”
But nobody can really know the full depth and scope of what drives buying or selling, both in the short or long term, or when the dynamics will change. The bottom line is that corrections are a normal part of stock market behavior, and despite the anxiety they may cause in the short term, historically, they do not last.
In our view, investing isn’t about today or tomorrow, or even next month. Investing is about planning for the future. That’s why we create personalized financial plans for our clients that consider their risk tolerance levels, financial goals and the time frames in which they wish to achieve those goals. We can do the same for you, so contact an Edelman Financial Engines advisor today.
Investing strategies, such as asset allocation, diversification or rebalancing, do not ensure or guarantee better performance and cannot eliminate the risk of investment losses. All investments have inherent risks, including loss of principal. There are no guarantees that a portfolio employing these or any other strategy will outperform a portfolio that does not engage in such strategies. Past performance does not guarantee future results.
An index is a portfolio of specific securities (such as the S&P 500, Dow Jones Industrial Average and Nasdaq composite), the performance of which is often used as a benchmark in judging the relative performance of certain asset classes. Indexes are unmanaged portfolios and investors cannot invest directly in an index. Past performance does not guarantee future results.