Identification

• A market correction is usually a sudden temporary decline in stock or bond prices after a period of market strength.
  
  

Time Frame

• Market corrections are short-lived, lasting a few days to a couple of weeks before the market turns upward again.
  
  

Considerations

• If the stock market has been moving up very rapidly with large value gains, analysts will start to consider the market "overvalued" and expect a correction. During a correction, savvy investors can purchase good stocks at lower prices, potentially turning a profit when the market rebounds from the correction.
  
  

Effects

• During a correction, stocks typically lose 5 to 20 percent of their value. If the decline is greater than 20 percent, the market is entering into a bear market.
  
  

Warning

• Bear markets are drops of 20 percent or more lasting for an extended period of time. The 2008 bear market resulted in a greater than 50 percent loss in overall market value.