The last few years have been incredibly kind to equity investors. The S&P 500 rose roughly 24% in 2023, another ~24% in 2024, and then added around 16% in 2025. When you remember that long-term market returns usually sit somewhere in the 8–10% range, this three-year stretch is clearly well above average and genuinely impressive. It’s the kind of run investors should be grateful for, but it’s also exactly the kind of run that quietly changes how people start to think about risk, and how much volatility they believe they can comfortably live with.

A market correction, defined as a fall of 10% from a previous high, sounds dramatic, but it happens far more often than most people realise. In fact, they tend to arrive about as frequently as your birthday. Over the last few decades, the average decline within a calendar year has been around 14%, and yet roughly three out of every four years still end with a positive return. About once every five years, on average, we can also expect something much more uncomfortable, a decline of roughly one-third, like we experienced in 2020. This is simply what it means to invest in markets that move in a jagged line around a long-term upward trend. We call that volatility. What we cannot do, and never have been able to do consistently, is predict in advance when those drops will arrive or when they will reverse. Long-term investing requires a fair amount of humility.

When markets fall, your instinct is to run. That reaction is deeply human. But a market decline is not a lion. It’s a mostly harmless event that only becomes dangerous if you respond to it in the wrong way. You will experience many market declines during your investing lifetime, and your mindset when they occur is one of the most important choices you will ever make. They should be met with confidence rather than fear, and with an understanding that they are also the source of opportunity. You have the luxury of being a long-term participant in a system where everyone else is playing a different game. What happens in the next 30 days is irrelevant to your 30-year plans. If you’re in it for the long run, the odds really are stacked in your favour.

Markets deliver positive returns in roughly three out of every four years. The difficult year earns you the other three. It is simply the price of admission for benefitting from the collective ingenuity of thousands of companies working for you while you sleep. The temporary declines are the reason permanent returns exist. You cannot have one without the other.

There’s a well-known line from Warren Buffett that the stock market is a device for transferring money from the impatient to the patient. If you’re still saving, periods of market decline are actually your best friend, because they allow you to buy more shares at better prices. More broadly, success in investing (and in life) comes down to practising rationality under uncertainty. It means choosing to act on a plan rather than reacting to headlines. We don’t know where markets will be in six months. But I'm very comfortable with where they’re likely to be in ten years - much higher. Time is the enemy of market declines. And thankfully, for long-term investors, we have plenty of it. 🩷

Disclaimer: The information provided is for general information and educational purposes only and does not constitute personal financial advice. It does not take into account your individual objectives, financial situation, or needs. Before making any financial decisions, you should consider whether the information is appropriate for you and, where necessary, seek personalised advice from a qualified financial adviser.