S&P 500 enters correction territory, rebounds slightly

Last week, the S&P 500 index joined the Nasdaq in what is known as a correction. This means the S&P 500 fell 10.1% from its peak on February 19. A correction is a quick decline in stock prices, while a bear market lasts longer and is a drop of 20% or more. Despite this drop, the S&P 500 rebounded on Friday, gaining 2.1%. As of Monday, it was about 7.5% below its all-time high. Historically, corrections are more common than bear markets. Between 1929 and 2024, there were 56 corrections, with only 22 leading to bear markets. Recently, bear markets have been rare. Investors have benefited from buying during corrections in the past. For example, after the correction in October 2023, the S&P 500 saw substantial gains in 2023 and 2024. Overall, the S&P 500 has increased by 540% over the last 15 years, despite some significant drops. It's important for investors to know their portfolios well. Just because a stock or ETF has many holdings does not guarantee good diversification. For example, the Vanguard Growth ETF has a large portion of its investments in just 10 companies. Investors should be cautious and understand which stocks can greatly impact their returns. Investment expert Peter Lynch noted that volatility is part of investing in stocks. If investors can handle the ups and downs of the market, buying and holding stocks for the long term can lead to significant wealth growth.