The Stock Market Is in a Drawdown
90% of the Time
What This Means for Investors
If you're an investor, you need to understand this fundamental reality: Living in a drawdown is normal. It's not a crisis. It's not a sign something is broken. It's just how markets work.
Markets spend the vast majority of their time below previous all-time highs. New highs are rare events. The sooner you internalize this, the better investor you'll become.
The question isn't "Should I invest when markets are down?" The question is: "Which drawdowns actually matter?"
Because here's the thing: not all drawdowns are created equal. The market being down 2% from all-time highs is meaningless noise. But when it's down 20%+ in a severe correction? That's when patient investors make their fortunes.
Why Understanding Drawdown Severity Matters
Since markets are in drawdown most of the time, you can't just "buy the dip" on every down day. You'd be buying constantly, and most of those purchases would be at mediocre prices.
The key is distinguishing between three types of drawdowns:
Garden-Variety
Normal market fluctuations. Happens constantly. Nothing special.
Drawdown Severity Score™: 0-2x
Meaningful
Larger than usual. Worth watching. Potentially interesting.
Drawdown Severity Score™: 2-5x
Severe
Rare extreme events. These are your wealth-building opportunities.
Drawdown Severity Score™: 5-10x+
This is what our Drawdown Severity Score™ calculates for every asset you monitor. We analyze 40 years of historical data to understand what's "normal" for each stock, ETF, or cryptocurrency—then alert you only when truly exceptional opportunities appear (5-10x+ severity events).
Want to understand how we calculate severity?
Learn about the Drawdown Severity Score™ →Different Assets, Different Volatilities
Here's where most investors get it wrong: The same percentage drop means completely different things for different stocks.
Real Examples from Our Database
How the same percentage drop produces different Drawdown Severity Scores™
(Higher scores = more unusual for that asset)
| Asset | 5% Drop Drawdown Severity Scores™ | 20% Drop Drawdown Severity Scores™ | 50% Drop Drawdown Severity Scores™ |
|---|---|---|---|
| S&P 500 (SPY) Low volatility | 2.6 🟡 Significant | 10.5 🔴 Epic | 26.3 🔴 Epic |
| Meta (META) Medium volatility | 1.0 🟢 Slightly Elevated | 4.0 🟡 Significant | 10.0 🔴 Epic |
| Microsoft (MSFT) Medium volatility | 0.9 🟢 Typical Drawdown | 3.7 🟡 Significant | 9.3 🔴 Large |
| Apple (AAPL) Medium volatility | 0.9 🟢 Typical Drawdown | 3.5 🟡 Significant | 8.9 🔴 Large |
| Tesla (TSLA) High volatility | 0.8 🟢 Typical Drawdown | 3.3 🟡 Significant | 8.2 🔴 Large |
| Ethereum (ETH) Very high volatility | 0.8 🟢 Typical Drawdown | 3.1 🟡 Significant | 7.7 🔴 Large |
Same percentage drop, completely different meanings. This is why context matters. This is why historical analysis matters. And this is why you can't use the same rule for every asset.
DrawdownAlerts adjusts for each asset's individual volatility profile. We calculate severity scores that are normalized and comparable across all asset types—stable stocks, volatile tech, crypto, ETFs. Everything gets the same fair, data-driven analysis.
The Psychology of Drawdowns
Living in drawdown most of the time is psychologically challenging. Your portfolio is "underwater" relative to previous peaks. You're constantly seeing red numbers. It feels wrong.
But this is where temperament separates successful investors from unsuccessful ones.
"The most important quality for an investor is temperament, not intellect."
— Warren Buffett
The ability to live with constant drawdowns—and recognize when they become opportunities—is what separates compounding machines from panic sellers.
Most investors have the wrong mental framework. They think:
❌ "My portfolio is down 20% from its high. Something is wrong. I should sell."
Successful investors think:
✅ "My portfolio is down 20%. Is this a normal drawdown or a severe one? If severe, should I buy more?"
The difference? One group reacts emotionally to every fluctuation. The other distinguishes signal from noise, and acts strategically only when the data says it matters.
Real-World Impact: Missing the Opportunities
Understanding that markets are in drawdown most of the time is academic. The real question is: What do you do about it?
If you sit in cash waiting for the "perfect" moment, you miss years of compounding. If you buy every dip, you waste capital on mediocre entries. The winning strategy? Buy quality stocks during severe drawdowns (5-10x+ deeper than typical), then hold patiently.
See What This Strategy Actually Returns
We analyzed real historical opportunities where our system would have triggered alerts. The results are eye-opening.
View Historical Returns Calculator →The math is simple: Catching just one severe drawdown opportunity per year, held for 3-5 years, can add 2-3% to your annual returns. Compounded over decades? That's life-changing wealth.
How DrawdownAlerts Helps
You now understand the problem: Markets are in drawdown most of the time, but only rare severe drawdowns (5-10x+ typical) actually create wealth. The challenge? Identifying those rare moments without obsessing over your portfolio daily.
This Is What We Do
We analyze 40 years of historical data for every asset
Calculate typical drawdown patterns, volatility, and what's "normal" vs "unusual" for each specific ticker.
We monitor your watchlist 24/7
Every evening after market close, we check each of your monitored stocks, ETFs, and cryptos against their historical baselines.
We alert you only when it matters
When an asset hits a truly severe drawdown (5-10x+ deeper than its typical pattern)—those rare moments that happen once a year or less—you get an email alert.
You stay passive the rest of the time
No daily checking. No stress. No decision fatigue. Just live your life, and we'll wake you up for the few days per year that actually create wealth.
No credit card required • Set up in seconds
The Bottom Line
Markets are in drawdown 95% of the time. That's not a bug—it's a feature. The key is knowing which drawdowns to ignore (most of them) and which to act on (the rare severe ones).
Stop treating every market dip like a crisis. Start recognizing the rare opportunities that actually build wealth.