\n| Bear Market<\/td>\n | 20% or More<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n Historically, market corrections have occurred approximately every one to two years.<\/p>\n While each event feels different in the moment, corrections have historically been a recurring feature of investing rather than an exception.<\/p>\n Historical Market Recoveries Demonstrate the Temporary Nature of Most Corrections<\/strong><\/p>\nMany investors focus on the decline itself but overlook the recovery process.<\/p>\n Historically:<\/p>\n \n- Many corrections reach their low point within approximately three to six months<\/li>\n
- Recoveries often occur over the following months<\/li>\n
- Bear markets generally last longer and require additional recovery time<\/li>\n<\/ul>\n
Historical Market Correction Characteristics<\/strong><\/p>\n\n\n\nMarket Event<\/strong><\/td>\nHistorical Observation<\/strong><\/td>\n<\/tr>\n<\/thead>\n\n\n| Correction Frequency<\/td>\n | Approximately every 1\u20132 years<\/td>\n<\/tr>\n | \n| Typical Correction Low Point<\/td>\n | 3\u20136 months<\/td>\n<\/tr>\n | \n| Bear Market Frequency<\/td>\n | Approximately every 4\u20137 years<\/td>\n<\/tr>\n | \n| Recovery Timeline<\/td>\n | Varies significantly<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n Although no two market environments are identical, history demonstrates that declines have been a recurring part of long-term wealth creation.<\/p>\n Investor Behaviour Often Creates Greater Damage Than Market Declines<\/strong><\/p>\nMarket volatility itself is rarely the primary threat to long-term investors.<\/p>\n Behavioural reactions frequently create more lasting consequences.<\/p>\n Investors often:<\/p>\n \n- Sell during periods of fear<\/li>\n
- Attempt to time market bottoms<\/li>\n
- Chase recent performance<\/li>\n
- Follow crowd behaviour<\/li>\n
- Abandon long-term plans<\/li>\n<\/ul>\n
These reactions can convert temporary declines into permanent financial setbacks.<\/p>\n This reality highlights why behavioural discipline is often just as important as portfolio construction.<\/p>\n Behavioural Finance Explains Why Rational People Make Irrational Decisions<\/strong><\/p>\nBehavioural finance studies how emotions and psychological biases influence financial decision-making.<\/p>\n Traditional finance assumes investors act rationally.<\/p>\n Real-world experience often demonstrates otherwise.<\/p>\n During periods of uncertainty, fear and emotion can override logic, leading investors to make decisions that conflict with their long-term objectives.<\/p>\n Understanding these biases is often the first step toward reducing their impact.<\/p>\n The DALBAR Gap Illustrates the Cost of Emotional Decision-Making<\/strong><\/p>\nOne of the most widely cited behavioural finance studies comes from DALBAR.<\/p>\n DALBAR Investor Behaviour Study<\/strong><\/p>\n\n\n\nInvestment Outcome<\/strong><\/td>\nAnnual Return<\/strong><\/td>\n<\/tr>\n<\/thead>\n\n\n| Average Investor<\/td>\n | 4.8%<\/td>\n<\/tr>\n | \n| Balanced Portfolio (65\/35)<\/td>\n | 8.8%<\/td>\n<\/tr>\n | \n| Annual Behaviour Gap<\/td>\n | 4.0%<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n Over long periods, seemingly small differences in annual returns can compound into substantial differences in wealth accumulation.<\/p>\n The study suggests that investor behaviour\u2014not necessarily investment selection\u2014can have a significant impact on outcomes.<\/p>\n Common Behavioural Biases Frequently Appear During Market Corrections<\/strong><\/p>\nSeveral behavioural biases tend to become more pronounced when markets decline.<\/p>\n Confirmation Bias<\/strong><\/p>\nInvestors seek information that supports existing beliefs while ignoring conflicting evidence.<\/p>\n Loss Aversion<\/strong><\/p>\nLosses often feel significantly more painful than gains feel rewarding, causing investors to hold losing positions or avoid appropriate risks.<\/p>\n Overconfidence Bias<\/strong><\/p>\nInvestors may overestimate their ability to predict markets, pick securities, or identify turning points.<\/p>\n Recency Bias<\/strong><\/p>\nRecent events are often given disproportionate weight when making future decisions.<\/p>\n Anchoring Bias<\/strong><\/p>\nInvestors become attached to purchase prices or previous valuations despite changing circumstances.<\/p>\n Herding Behaviour<\/strong><\/p>\nMany investors simply follow what others are doing rather than focusing on their own financial plan.<\/p>\n Recognizing these tendencies can help investors make more objective decisions during periods of uncertainty.<\/p>\n <\/p>\n Home Bias Can Increase Portfolio Concentration Risk<\/strong><\/p>\nCanadian investors often display a strong preference for domestic investments.<\/p>\n While familiarity may feel comfortable, Canada represents a relatively small portion of global equity markets.<\/p>\n Home Bias Considerations<\/strong><\/p>\n\n\n\nConsideration<\/strong><\/td>\nImpact<\/strong><\/td>\n<\/tr>\n<\/thead>\n\n\n| Canadian Market Size<\/td>\n | Approximately 3% of Global Equity Markets<\/td>\n<\/tr>\n | \n| Common Allocation by Canadians<\/td>\n | Often More Than 50%<\/td>\n<\/tr>\n | \n| Primary Sector Exposure<\/td>\n | Financials, Energy, Resources<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n A heavy concentration in Canadian equities may limit exposure to sectors such as technology, healthcare, and global consumer businesses.<\/p>\n Diversification across regions and sectors can help reduce reliance on any single economy or market segment.<\/p>\n Investor Behaviour Can Be Managed Through Disciplined Processes<\/strong><\/p>\nWhile behavioural biases cannot be completely eliminated, they can be managed.<\/p>\n Common approaches include:<\/p>\n \n- Maintaining a long-term perspective<\/li>\n
- Following a written investment policy<\/li>\n
- Diversifying globally<\/li>\n
- Rebalancing systematically<\/li>\n
- Avoiding reactionary decisions based on headlines<\/li>\n
- Aligning investments with personal goals<\/li>\n<\/ul>\n
Financial media often focuses on short-term market movements because uncertainty attracts attention. Long-term financial plans typically require a much longer time horizon than daily news cycles.<\/p>\n Retirement Investors Experience Market Volatility Differently<\/strong><\/p>\nFor investors approaching retirement or already drawing income from their portfolios, volatility carries additional considerations.<\/p>\n A retiree withdrawing income during a market decline may face different challenges than an investor with several decades before retirement.<\/p>\n Factors often considered include:<\/p>\n \n- Portfolio diversification<\/li>\n
- Cash reserves<\/li>\n
- Fixed-income allocations<\/li>\n
- Withdrawal strategies<\/li>\n
- Sequence-of-returns risk<\/li>\n<\/ul>\n
A portfolio designed for retirement generally serves a different purpose than a portfolio designed primarily for long-term accumulation.<\/p>\n The goal is often not to eliminate volatility, but to ensure the portfolio remains aligned with spending needs and risk tolerance.<\/p>\n Market Corrections Often Reveal the Difference Between Risk Tolerance and Risk Capacity<\/strong><\/p>\nMany investors discover their true tolerance for market declines only after experiencing one.<\/p>\n There is often a significant difference between:<\/p>\n \n- How much volatility an investor thinks they can tolerate<\/li>\n
- How much volatility their financial plan can withstand<\/li>\n<\/ul>\n
Market corrections frequently expose this gap.<\/p>\n This is why investment planning extends beyond portfolio construction and includes cash flow planning, retirement modelling, tax considerations, and long-term objectives.<\/p>\n The Complexity Gap<\/strong><\/p>\nWhile market corrections and behavioural finance principles are broadly understood, applying them to a specific family situation is significantly more complex.<\/p>\n Factors that influence decision-making include:<\/p>\n \n- Retirement timelines<\/li>\n
- Corporate investment accounts<\/li>\n
- Family income needs<\/li>\n
- Tax considerations<\/li>\n
- Estate planning objectives<\/li>\n
- Withdrawal requirements<\/li>\n
- Risk tolerance and risk capacity<\/li>\n<\/ul>\n
A strategy that may be appropriate for a 35-year-old business owner in Vaughan may differ significantly from that of a retired couple in Markham drawing income from their investment portfolio.<\/p>\n The strongest investment decisions are typically made within the context of a comprehensive financial plan rather than in response to market headlines.<\/p>\n FAQ: Market Volatility and Investor Behaviour in 2026<\/strong><\/p>\nShould I sell my investments during a market correction?<\/strong><\/p>\nMarket corrections are a normal part of investing and have occurred throughout history. Decisions during periods of volatility should be evaluated within the context of your overall financial plan rather than short-term market movements.<\/p>\n How often do stock market corrections occur?<\/strong><\/p>\nHistorically, corrections of 10% or more have occurred approximately every one to two years. While every correction is unique, market declines have been a recurring feature of long-term investing.<\/p>\n Why do investors often underperform the investments they own?<\/strong><\/p>\nBehavioural factors such as panic selling, performance chasing, market timing, and emotional decision-making can negatively affect long-term returns. Maintaining discipline during periods of uncertainty can be challenging, but it remains an important part of investing.<\/p>\n Final Thoughts<\/strong><\/p>\nMarket volatility is not a flaw in the investing process\u2014it is a feature of it.<\/p>\n Corrections, pullbacks, and periods of uncertainty have occurred throughout every major market cycle. While declines often dominate headlines, investor behaviour frequently has a greater impact on long-term outcomes than the correction itself.<\/p>\n For many investors, the greatest challenge is not selecting investments\u2014it is maintaining discipline when markets become uncomfortable.<\/p>\n Understanding volatility, recognizing behavioural biases, and building a diversified financial plan can help investors make more informed decisions regardless of market conditions.<\/p>\n Financial planning for market volatility and investor behaviour is not one-size-fits-all. To see how these principles apply to your specific portfolio, book an Online Consultation or visit our AGES Wealth Management office in Markham, Ontario.<\/strong><\/p>\nBook a Strategy Call with our team at our office in Markham, Ontario or virtually:<\/strong><\/p>\nhttps:\/\/outlook.office.com\/book\/AGESWealthManagement1@wellington-altus.ca\/s\/S0cc9kF9ZUyFmk6OCy7WCg2?ismsaljsauthenabled<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"Market corrections are a normal part of investing, but investor behaviour often has a greater impact on long-term results than market declines themselves. Learn how volatility works, why behavioural biases affect decision-making, and how disciplined planning can help investors stay focused on their long-term goals. Key Takeaways Market corrections are a normal part of investing […]<\/p>\n","protected":false},"author":322,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_oasis_is_in_workflow":0,"_oasis_original":0,"_oasis_task_priority":"2normal","_exactmetrics_skip_tracking":false,"_exactmetrics_sitenote_active":false,"_exactmetrics_sitenote_note":"","_exactmetrics_sitenote_category":0,"footnotes":""},"categories":[1],"tags":[],"class_list":["post-1000","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"acf":[],"_links":{"self":[{"href":"https:\/\/advisor.wellington-altus.ca\/ageswealthmanagement\/wp-json\/wp\/v2\/posts\/1000","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/advisor.wellington-altus.ca\/ageswealthmanagement\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/advisor.wellington-altus.ca\/ageswealthmanagement\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/advisor.wellington-altus.ca\/ageswealthmanagement\/wp-json\/wp\/v2\/users\/322"}],"replies":[{"embeddable":true,"href":"https:\/\/advisor.wellington-altus.ca\/ageswealthmanagement\/wp-json\/wp\/v2\/comments?post=1000"}],"version-history":[{"count":4,"href":"https:\/\/advisor.wellington-altus.ca\/ageswealthmanagement\/wp-json\/wp\/v2\/posts\/1000\/revisions"}],"predecessor-version":[{"id":1017,"href":"https:\/\/advisor.wellington-altus.ca\/ageswealthmanagement\/wp-json\/wp\/v2\/posts\/1000\/revisions\/1017"}],"wp:attachment":[{"href":"https:\/\/advisor.wellington-altus.ca\/ageswealthmanagement\/wp-json\/wp\/v2\/media?parent=1000"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/advisor.wellington-altus.ca\/ageswealthmanagement\/wp-json\/wp\/v2\/categories?post=1000"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/advisor.wellington-altus.ca\/ageswealthmanagement\/wp-json\/wp\/v2\/tags?post=1000"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}} | | | | | | | | | |