The difference between a correction and a bear market — and 5 other financial terms to know for 2019

Excerpt from MarketWatch, published January 3, 2019

AFP/Getty Images

AFP/Getty Images

Here’s something else investors should know about the investing terms they’re hearing lately: descriptions like pullback, correction, and bear (or bull) market can be applied to specific stocks, assets and indexes. They can also be based on any time-frame — between a day and a decade — which could confuse investors trying to understand how this applies to their own investments. 

Here’s a breakdown of these terms:

Pullback: A pullback refers to a share price decline 5% and 9.9% from the price’s peak, said Eric Walters, a financial adviser and president at SilverCrest Wealth Planning in Greenwood Village, Colo. There have been 78 market pullbacks since the end of 1945, according to asset management and investment firm Guggenheim Investments. Comparatively, there have been 27 corrections (with an average decline of 13%) and eight bear markets (with a 27% average decline).