Part 3/7:
While it's common to focus on average returns of approximately 10% over the long term, historical analyses reveal volatility alongside those returns. The S&P 500’s returns exhibit significant fluctuations, leading to substantial drawdowns more frequently than implied by average annual performance alone. This makes the current situation seem familiar, as historical data indicates that drawdowns over 5%, 10%, and even 20% are not unusual occurrences.
A key insight is that even in years with positive returns, substantial intra-year swings can often occur, highlighting that market volatility is a shared experience among investors and does not necessarily indicate a long-term downturn.