That is the question on many an investor's mind. Drops of 5 percent over a few weeks or even a month or two can be pretty common and nine out of 10 such slide, bottom out, and rise again. It's the other 10 percent that has investors scared.
Who can tell if this is a self-correction or a bear market when even the professionals have trouble telling the two apart. Look at these two examples from the WashingtonPost article:
1. In 2005, the Dow dropped more than 800 points -- 8 percent -- in March and April before rallying, then dropped an additional 400 points in September and October before climbing some more. In both cases, investors who jumped out prematurely would have suffered losses and missed another good rise.
2. On the other hand, analysts were full of rosy predictions in 2000 and 2001 that the market was simply resting briefly and would soon resume its dizzying climb. None of the major indicators have ever returned to their early 2000 highs.
Read the full article here.
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