Should You Worry About Stock Market Corrections
/Why You Shouldn’t Stress About a Market Correction
By Shelley Murasko
A stock market drop of more than 10% is what financial professionals call a “correction.” And let’s be honest—it can feel unsettling, even scary. But if you’re a long-term investor with a well-balanced portfolio, there’s really no need to panic.
A Correction Isn’t a Crisis
First off, let’s clarify something: when we talk about a “market correction,” we’re referring to stocks, not bonds. And if your portfolio is balanced—say, around 60% stocks and 40% bonds—a correction will only affect a portion of your total investments. Your nest egg is more resilient than you might think.
Corrections Are Normal—and Expected
Market corrections aren’t rare surprises, they’re part of the deal when investing in stocks. They happen regularly and are just as inevitable as taxes. In fact, here’s how often they typically occur:
Recent stock market correction history- yahoo finance charting
Despite dire headlines, no one can accurately predict when a correction will hit. Not even investing legend Warren Buffett tries to time the market. As he says, “The only value of stock forecasters is to make fortune tellers look good.”
As it relates to the current political environment, the stock market does not like change; and the current administration is pursuing several changes - some that will likely prove positive, some that will prove negative, and some that won't last but a day or two. Some investors are reacting to the political changes without really staying mindful of the long term. Sensible investors will ignore short-term predictions. Keep in mind that most Democrats feel unsettled by the new administration's actions; and at the same time, most Republicans welcome the shake up. Sensible investors don't mix their politics with their investing strategy.
So yes—another correction is happening. But wasting energy trying to guess when it will end is a game you won’t win.
Stay the Course with Quality Investments
When the market takes a dip, it’s tempting to make changes. Don’t. If your investments are high quality where fees are low, and past performance and volatility is similar to benchmark returns, then it is likely best to stick with them. Market corrections often sound worse than they are. For long-term investors, a correction can even be an opportunity to buy quality stocks at a discount.
Market Dips Are Unpredictable
Corrections don’t follow a script. We can’t know how long they’ll last or how deep they’ll go. That’s why trying to “time the market” almost always backfires. Getting out too early and jumping back in too late can seriously damage long-term returns.
Use Corrections to Reflect, Not React
Instead of reacting emotionally, use corrections as a chance to evaluate your investments. Which stocks or funds hold their value best? Which bounce back fastest? Think about why you own each investment, and whether your goals have changed.
It also helps to pause and reflect—use the analytical side of your brain. Making emotionally driven decisions rarely pays off in investing.
Diversification Helps You Sleep Better
The best defense? A balanced portfolio. Take the Vanguard Balanced Index Fund (VBIAX) as an example. It sticks to a 70/30 stock-bond mix and has weathered multiple corrections with a solid long-term performance—an average annual return of 9.3% over 15 years.
Here’s how VBIAX performed during six corrections:
2008: -22%
2011: +4%
2015: +0.5%
2016: +9%
2018: -3%
2022: -17%
Compare that to the broader market’s 28% drop in 2022, and it’s clear how diversification can soften the blow.
What If I Am Withdrawing from My Portfolio
If you find yourself in retirement where you are drawing from your portfolio, then it is a good time to assess which parts of the portfolio are holding up and how long those investments will cover you. As of the recording of this article, Berkshire Hathaway stock is up 17% year to date, International stocks are up 8% year to date, and the bond funds are tracking up 2% year to date. These are three categories that many of our investors hold that can help weather the current storm.
Bottom Line
Market corrections are inevitable, but they’re not the end of the world. With a diversified portfolio, a calm mindset, and a long-term perspective, there’s likely no need to worry. As Vanguard founder John Bogle wisely said: “Stay the course.”
A well-balanced mix of quality stocks and bonds can help you ride out the rough patches, recover faster, and stay focused on the big picture.
Past performance is no guarantee of future results. Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio. Investing involves risks. Wealthrise Financial Planning is an investment advisor registered with FINRA. This material is provided for informational and educational purposes only. It should not be considered investment advice or an offer to buy or sell securities.
