Corrections of at least 8% in the major indexes happen at least once a year almost every year. Here are some of the wisest sayings about market corrections that I recall. You could add your own in the comment section below.
1. Market corrections make people a lot of money. They just don’t know it at the time.
2. Corrections come a lot slower than anyone expects, but once they happen they escalate faster than most could imagine.
3. Corrections are healthy only when they happen to other people’s stocks.
4. All corrections feel the same. In the beginning, people don’t believe them, then as prices continue lower and weakness spreads to more sectors, fear escalates and it leads to forced liquidation. Forced liquidation means selling, because you have to, not because you want to. Smart investors dream to be on the other side of forced liquidation.
5. At the lowest point of a correction, the fear of losing is substantially higher than the fear of missing out.
6. During corrections, correlations often go to 1.00, which means that stocks move together up and down disregarding of individual merits. If a stock manages to hold its ground and consolidates through time or even make an attempt to make new high, it is likely being accumulated by institutions. Because of the nature of their size, many institutions prefer to buy on pullbacks and during market corrections. Selloffs provide liquidity that masks their accumulation. Once the pressure from the general market is removed, those stocks tend to outperform.
7. “You don’t need analysts in a bull market, and you don’t want them in a bear market.” – G. Loeb
8. “The market is better at predicting the news than the news is at predicting the market.” – G. Loeb
9. Bottoms are made by heavy buying, not heavy selling. Stocks not going down on what appears to be bad news is a positive sign.
10. “It is not entirely clear what causes deep market corrections, but without them many of the best performing long-term investors would have never achieved their spectacular returns.” – Peter Lynch