2020 stock market crash

A stock market crash and a stock market correction are both declines in the stock market, but they are different in a few important ways.

A stock market crash is a sudden, sharp and often unexpected drop in stock prices, usually defined as a decline of 20% or more over a short period of time. Because of the damage they can cause to the global economy, it usually takes months or even years for the stock market to recover from a crash.

A stock market correction is generally defined as a drop of 10% or more from a recent high in the stock market. Corrections are more common than crashes and their recoveries tend to be faster, lasting anywhere from a few weeks to a few months. In fact, corrections are often seen as a good thing because it allows the market to reset before potentially moving higher.

It depends on the circumstances surrounding the crash and how severe the stock market crash was, but a recovery from a stock market crash can be anywhere from a few months to several years.

For example, the stock market crash caused by the onset of the COVID-19 pandemic in March 2020 led to one of the fastest stock market recoveries in history. By the fall of 2020, the S&P 500 had recovered its losses from the crash. On the other hand, it took more than a decade for the stock market to recover from the 1929 stock market crash and the Great Depression that followed it.⁷

Those are extreme cases, though. Most stock market crashes recover within a year or two of hitting bottom.

When it comes to navigating the stock markets highs and lows, Dave Ramsey always says that the only people who get hurt on rollercoasters are the ones who jump off in the middle of the ride.

It’s important to remember that you technically don’t lose any money during a stock market crash. The only people who actually lose money are the ones who sell their investments after a crash. If you stay patient and keep a long-term perspective, your investments will most likely bounce back and regain their value over time.

So, if the stock market is crashing and you’re in a panic, the best thing you can do is nothing at all. If you’re not sure what to do, set up a meeting with a financial advisor who can walk you through your options.