Lesson One · The historical record
The stock market has lost a third or more of its value at least six times in the last hundred years — and recovered every time.
Across roughly a century of US equity history there are six big enough to be named: 1929–1932 (the Great Depression, ~−86%), 1973–1974 (~−48%), 1987 (~−34%, the one-day version), 2000–2002 (~−49%, the dot-com unwind), 2007–2009 (~−57%, the global financial crisis), and 2020 (~−34%, the pandemic crash). Some of these took eighteen months to recover; one took fifteen years. None of them turned out to be the end. The lesson the chart teaches — without saying anything — is that drawdowns are not anomalies but features. They are the price equity investors pay for the long-run return.
“Drawdowns are not anomalies. They are the price you pay for the long-run return.”