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Glossary entry · Trade-offs
Correction
Definition
A drop of 10% to 20% in an asset or market from its recent peak. Considered normal market behavior, happening on average every 1-2 years for major indexes. Often resolves within months. The cousin of crashes (faster, deeper) and bear markets (slower, longer).
Example
The S&P 500 has had over a dozen corrections since 2000 — most quickly forgotten.
Related
Trade-offs
Risk
The chance that an investment loses value — and how much it could lose.
Read →Volatility
How wildly an investment's price moves up and down. High volatility = bigger swings.
Read →Diversification
Spreading money across many different things so no single one can sink you.
Read →Bull & bear market
Long stretches of rising prices (bull) or falling prices (bear). Both end, eventually.
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