Index & ETF Investing"Just buy the index and hold" is good advice — and it comes with a footnote most people skip. Holding is easy on paper and brutal in practice, because you have to hold through declines like these. Knowing their shape in advance is the best preparation there is.
The S&P 500 has had several deep drawdowns this century: roughly −37% in 2008, a fast −34% in early 2020, and about −18% in 2022. Each recovered eventually — but "eventually" ranged from months to years, and the recovery only helped the investors who didn't sell. The size of the drawdown, and your ability to sit through it, matter more than any average.
The declines that tested buy-and-hold
| Episode | Approx. S&P 500 decline | Character |
|---|---|---|
| 2008 financial crisis | −37% (calendar year) | Deep and slow; a multi-year recovery |
| 2020 COVID crash | −34% (Feb–Mar) | Violent but brief; recovered the same year |
| 2022 rate shock | −18% (calendar year) | Grinding; stocks and bonds fell together |
Approximate figures for orientation. The exact impact on your portfolio depends on your allocation and the window you test.
Why the average return is a comforting lie
Over long stretches the S&P 500 has returned roughly 10% a year on average — a number that makes investing sound smooth. It wasn't. That average is the blended result of +30% years and −37% years, and no one actually experiences "the average." What you experience is the sequence, and the sequence includes the year your account dropped by more than a third. Planning around the average, rather than the worst year, is how people end up selling at the bottom.
See it on your own portfolio
The Investment Safety Check replays your exact ETF allocation — U.S. large, mid and small cap, international, treasuries, bonds, gold and more — month by month through all three episodes, with a rules-based model overlaid. You get the drawdown and the worst 12-month stretch for each. If you're going to hold through the next one, it helps to know its likely shape first. Related: how to backtest an index ETF portfolio.
Losing less is what makes holding possible
Here's the quiet connection: the portfolios that are easiest to hold are the ones that fall less. A model that trims risk as markets weaken doesn't just improve the math — it improves your odds of staying invested at all. That's the goal behind Alpha Edge: shallower drawdowns, so discipline is something you can actually sustain.