Market Correction
Correction boursière in French
Quick definition
A market correction is a decline of 10% to 20% in stock prices from a recent high. Corrections are frequent, arriving every year or two on average, and most of them end without deepening into a bear market.
The 10% to 20% band
The correction label covers the territory between ordinary volatility and a bear market. Once a broad index falls 10% from a recent high, the decline is officially a correction; past 20%, it graduates to bear market status. Most never do: they bottom out well short of that line and give way to the bull market that preceded them.
They are also common. On average a correction comes along every year or two, so a long-term investor should expect to sit through dozens. Something that happens that often is not a crisis; it is background noise with good publicity.
Why corrections feel worse than they are
Two amplifiers turn routine corrections into apparent emergencies. The first is headline volume: a falling market generates far more coverage, and far more dramatic coverage, than the slow rise that preceded it.
The second is dollar math on a growing portfolio. A 10% correction on a $50,000 portfolio is $5,000; the same routine event on the $800,000 portfolio you hold years later is $80,000, which reads like catastrophe even though the percentage, and the likely recovery, are exactly the same.
The correction playbook
A correction calls for maintenance, not surgery:
- Check your allocation, not your balance. If your mix of stocks and bonds still matches your risk tolerance and targets, the portfolio is doing its job.
- Keep automatic contributions running. Every purchase during a correction buys more units at lower prices, which is dollar-cost averaging working as intended.
- Stop checking daily. Watching a falling balance several times a day maximizes pain and adds zero information. A correction checked monthly is a footnote; checked hourly, it feels like a crisis.
The admission price of equity returns
Corrections are not a malfunction of the stock market; they are the cost of admission. The long-term returns stocks deliver exist precisely because prices swing enough to scare people. For anyone still accumulating, corrections are also sales: the same investments at lower prices. Keep that framing honest, though: nobody rings a bell at the bottom, and any correction can deepen before it turns. The trustworthy version of buying the dip is simply not stopping the buying you were already doing.
In Canada
Canadian news feeds are dominated by US market moves, so Canadians often hear about a correction their own portfolio only partly experienced. The Canadian and US markets do not always correct at the same time or by the same amount, and a globally diversified portfolio rarely falls as much as the scariest index in the headlines. Before reacting, check what your own portfolio actually did.
Worked example
A correction knocks 12% off the market, and Lise's $450,000 portfolio drops about $42,000, less than the index because her bonds held steady. Rattled, she follows the playbook: her allocation is still near target, her automatic contributions keep buying at lower prices, and she moves the investing app off her phone's home screen. The correction ends, as most do, without becoming a bear market, and those months' contributions are the cheapest units she buys all year.
Reviewed by Alexandre Bernier, CFP®, CIM®, PFP®·Updated August 2026