When markets fall, it’s easy to forget that downtrends are part of the investing cycle. So when prices slip, it's a good time to review some common terms that you may be hearing that describe today’s financial markets.
The first is “pullback,” the mildest form of a drop in the markets. You might hear a market commentator refer to a dip of 5% to 10% after a peak as a pullback.
The next term is “correction,” which is used when markets drop 10% to 20% after a peak. Then there is a “bear market,” where the drop is 20% or more since the last peak.
When prices are trending lower, it’s easy to second-guess yourself. But over the years, I’ve found that doesn’t help.
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