22 Feb 2022
Market Metrics: Equity Market Corrections VS Crashes
- Posted by Dejan Pekic BCom DipFP CFP GAICD, Senior Financial Planner
Asset price corrections, defined as a 10% fall or more from recent peak are common while asset price crashes, defined as a 20% fall or more from recent peak are less common.
Both corrections and crashes are actually routine financial markets phenomena but they occur at irregular intervals which is why they can never accurately be predicted. In hindsight, the reason for the asset price fall is always obvious but in hindsight, we are all Trillionaires. Our point is that hindsight investing is meaningless fantasy.
Click for charts.
The learning from the charts is to accept that corrections and crashes are something that cannot be avoided when investing but once they do hit, Mr Market presents you with an opportunity to buy more quality assets at discounted prices.
In the words of Benjamin Graham…“Mr Market’s job is to provide you with prices; your job is to decide whether it is to your advantage to act on them. You do not have to trade with him just because he constantly begs you to.”
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