What is CORRECTION?
A correction is like when the price of your favorite candy goes down a little bit. In the stock market, it means the prices of stocks have dropped by about 10% from their highest recent point. It's a small dip.
What is BEAR MARKET?
A bear market is when the prices of stocks go down a LOT – like 20% or more. It's like your favorite toy store suddenly having a big sale on everything! It can last for a while and make people feel worried about their investments.
Key Differences
- Size of the Drop: A correction is a smaller drop (10%), while a bear market is a much bigger drop (20% or more).
- How Long it Lasts: Corrections usually don't last very long, maybe a few weeks or months. Bear markets can last much longer, even a year or more.
- Feeling: A correction might make you a little nervous, but a bear market can make people feel really worried and unsure about their money.
When to Use Each One
Imagine your parents are saving money for your college. If they see a correction, they might just keep an eye on things. It's like checking the weather forecast – you see a chance of rain, so you bring an umbrella, just in case. If they see a bear market, they might talk to a financial advisor to see if they should change their plans. It's like a big storm is coming, so you need to make sure your house is safe!
The Bottom Line
A correction is like a little wobble, and a bear market is like a big earthquake in the stock market. Understanding both helps you be prepared. If you're just starting to learn about money, understanding corrections is a good first step. If you see a bear market, talk to a grown-up who knows about money to get help.