Market declines like we have experienced in October may be more common than you think. Here are the surprising statistics on the frequency and magnitude of market declines against the backdrop of strong long-term returns for stocks:
- 5% “dips” occur every 3-4 months, on average.
- 10% “corrections” tend to occur once every 11 months.
- A 20% decline, or “bear market,” occurs every three to four years, on average.
- The typical market correction in the absence of a recession is 13%.
- 70% of corrections since World War II did not lead to a bear market.
- Bear markets that occur in the absence of a recession are rare, but have occurred.
In short, periodic declines — whatever the reason — are a normal and expected part of investing, and something that long-term investors should take in stride.