The stock market has been on an impressive run since the 2022 bear market. The S&P 500 (^GSPC -0.17%) — which tracks the largest 500 American companies on the stock market — has strung together three consecutive years of double-digit returns and is up 13% as of market close on Aug. 7.
There are no immediate signs of a stock market correction, but history shows it’s a matter of when, not if. Corrections and bear markets are a natural part of the stock market cycle. And one thing that could make or break your portfolio when it does happen is whether you ride out the storm.
Image source: Getty Images.
Don’t turn investing into gambling
There’s a saying in the investing world: Time in the market beats timing the market. In other words, investors are typically better off staying invested through the highs and lows rather than trying to sell before an anticipated drop or buy before an anticipated surge.
Nobody — and I do mean nobody — can predict how the stock market will perform. Not me, not you, not the Wall Street firms with virtually unlimited resources. So, if you’re trying to time the market, you’re essentially gambling. And although you may be right occasionally, all it takes is to be wrong one time to undo a lot of progress.
The case for staying invested
It can be hard to watch your investments lose value during a correction, but the one silver lining is that the market has always bounced back over the long run. For perspective, let’s take a look at how well the S&P 500 has performed since hitting the trough (the lowest point in a cycle) during the past five recessions.
| Trough Date | Gains Since Trough |
|---|---|
| March 23, 2020 | 245% |
| March 9, 2009 | 1,040% |
| Sept. 21, 2001 | 700% |
| Oct. 11, 1990 | 2,520% |
| Aug. 12, 1982 | 7,450% |
Data source: YCharts. Returns as of market close on Aug. 11, 2026. Percentages rounded down to the nearest whole percentage.
Past results don’t guarantee future performance, of course, so I can’t say with 100% certainty that the trend will continue. However, considering the market’s long-term history (and the companies leading the way), there’s a very good chance the index continues its long-term trend of bouncing back.
The best investment for a stock market correction
The staple of my portfolio is the Vanguard S&P 500 ETF (VOO -0.19%) because investing in the S&P 500 is akin to investing in the U.S. economy. The U.S. economy has grown over time, and the S&P 500 has followed that same trajectory.
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VOO has the trifecta: diversified holdings, proven results, and a cheap price (0.03% expense ratio). It will hit rough patches, no doubt, but it’s as reliable as it comes in the long term. Even if a stock market correction happens, trust the long-term trajectory and stay committed to the plan.
