Principles of Sound Investing: The Courage to Hold Through a Downturn

Courage is the principle people picture wrong. It sounds like a bold move made at the bottom of a crash. In practice, it is almost always the opposite: sitting still while every instinct you have argues for action.

A historical perspective helps inform and guide investment decisions, and I have written about how that pairs with the investing principle of consistency. But perspective alone is not enough. Holding a disciplined position through uncertainty and fear takes something more, and that is where courage comes in. It is one of three principles we come back to constantly, and the overview of all three explains how they connect.

The short answer

Courage in investing is the willingness to keep following your plan when the market gives you every reason not to. It is rarely dramatic. It usually means continuing contributions during a decline, rebalancing toward what has fallen, and declining to move to cash because the news is loud.

• From 1980 through 2025, the S&P 500 fell by an average of roughly 14% at some point during the year, every single year.
• It still finished those years positive 35 times out of 46.
• A decline during the year and a loss for the year are not the same thing. Confusing them is where a great deal of money gets lost.
• A correction does not become a realized loss unless you sell.

Every generation faces challenges

Each generation faces challenges that appear both unique and overwhelming. Viewed through the lens of history, they are usually neither. The difficulties in front of us today are significant, and they are arguably no more daunting than a global depression, two world wars, the Cold War, the assassination of one president and the resignation of another, and 9/11.

The market kept climbing through all of it. Not smoothly, and not without long stretches that tested people badly, but it kept climbing. Humans are remarkably resilient, and remarkably good at inventing their way forward.

Declines are the price of admission, not a malfunction

Most investors treat a drawdown as evidence that something has gone wrong. The historical record suggests it is closer to a fee.

Data from J.P. Morgan Asset Management, FactSet, and Standard & Poor's covering 1980 through 2025 shows the S&P 500 experienced a maximum intra-year decline averaging about 14%. Not in bad years. In every year. There has not been a calendar year in that stretch without a pullback of some kind.

And yet the index finished positive in 35 of those 46 years. Both of those things are true at once, and the gap between them is where most investor mistakes live. People experience the intra-year decline as the story, act on it, and miss the year.

Put concretely: if you had panicked at the average annual low across those 46 years, you would have sold during a roughly 14% drawdown more than three times out of four in years that ultimately ended in the black.

Equities have historically been the primary engine of long-term growth in a portfolio, which is why your time horizon matters so much to how much of them you hold. That is an argument for owning stocks over long horizons. It is not an argument for owning only stocks, and it says nothing about how much you personally should hold. That question belongs to the balance principle.

Courage is harder when the dollars are larger

Percentages are abstract. Dollars are not. A 15% decline is the same 15% whether you have $60,000 invested or $1.5 million, but the second version arrives as a $225,000 line on a statement, and it does not feel like a percentage. It feels like a specific amount of money that was yours in January.

There is a second pressure that shows up once you have accumulated real assets, and it sounds reasonable every time: I already have enough. Why would I risk it? That question deserves a real answer rather than a slogan. Sometimes it is the right instinct, and the honest response is to reduce risk permanently through the allocation. What it is not is a reason to make a temporary move to cash during a decline, which is a market call wearing the costume of prudence.

The distinction matters. Changing your risk level because your circumstances or timeline changed is planning. Changing it because the last three weeks were bad is timing. The consistency post covers what that second choice tends to cost, including the tax bill that comes with selling appreciated positions.

Courage should not require heroics

Here is the part that gets left out of most writing on this subject. If holding your portfolio through a normal decline requires enormous willpower, the problem is usually not your willpower. It is the portfolio.

Courage is far easier to summon when the structure supports it. That means an allocation matched to your actual time horizon rather than an aspirational one. It means holding enough in cash and short-term bonds to cover near-term withdrawals, so a downturn never forces you to sell equities to fund your life. For anyone drawing income from a portfolio, that reserve is what turns a bear market from a crisis into an inconvenience.

Built that way, staying invested stops being an act of nerve and becomes the default. The plan absorbs the volatility instead of your discipline having to.

What courage actually looks like in a downturn

An old adage says to buy when there is blood in the streets. It is easier said than done and it does not have a perfect track record. The useful version of the idea is quieter than the quote suggests.

In a real decline, courage looks like continuing scheduled contributions. It looks like rebalancing back toward your targets, which mechanically means buying the asset class that just fell, and which will feel wrong at the time. It looks like harvesting losses to offset gains elsewhere rather than staring at the balance. It looks like not checking the account daily, which is a genuine strategy and not an avoidance.

Almost none of that is bold. It is mostly restraint, applied on a schedule.

Frequently asked questions

How do I tell the difference between courage and stubbornness?

Ask what would have to be true for you to change course. If the answer is a change in your goals, timeline, income, or health, you are being disciplined. If you cannot name any condition other than the market falling further, that is worth examining. Courage holds a plan. Stubbornness holds a position.

Is a 10% or 15% drop unusual?

No. From 1980 through 2025 the S&P 500's average maximum decline within a calendar year was about 14%, and every one of those 46 years contained a pullback. Declines of that size are the normal cost of participating, not evidence that something has broken.

How long do downturns usually last?

They vary widely, which is why nobody should promise you a number. What the record does show is that declines within a year are routine and frequently temporary. Every year from 1980 through 2025 contained a pullback averaging about 14%, and 35 of those 46 years still finished in positive territory.

I already have enough. Isn't moving to cash the safer choice?

If you genuinely need less growth than your current allocation is built for, the answer is to lower risk permanently and deliberately, not temporarily during a decline. Cash also carries its own risk over long horizons, since inflation erodes purchasing power quietly. Someone in their sixties may still be investing across a thirty-year timeline.

What if I am retired and taking withdrawals?

This is where sequence of returns matters most, because selling into a decline to fund living expenses locks in losses at the worst moment. The structural answer is a cash and short-bond reserve sized to cover near-term withdrawals, so your income does not depend on what equities did last quarter.

Should I buy more when the market falls?

If you have cash earmarked for investing and a long horizon, declines have historically been reasonable times to put it to work. That is different from pulling forward money you need soon, or trying to identify a bottom. Rebalancing accomplishes much of the same thing automatically and without requiring a call.

The bottom line

Consistency asks you to maintain steadiness in what you invest in and how much. Courage asks you to hold that steadiness when conditions make it feel unreasonable, in both directions: not fleeing when markets fall, and not abandoning your discipline when they run.

Historical performance does not guarantee future results. What history offers is perspective, and perspective is what makes courage possible. You are not being asked to be fearless. You are being asked to have a plan good enough that fear does not get a vote.

Read the other two principles of sound investing, consistency and balance, or start with the overview of how all three fit together.

Source: FactSet, Standard & Poor's, and J.P. Morgan Asset Management, data as of December 31, 2025. Index returns are for illustrative purposes only. Indices are unmanaged and not available for direct investment.

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