Bollinger said people think the amount of time you're in drawdown is 10-15% of the time, whereas in reality it's 80-90% of the time.This leads John to reference the trading concept of “regret” – the percentage of time you’re in a drawdown. Turns out it’s about 80% or 90% of the time you’re invested. The only times you’re not in a drawdown are when you’re setting new highs, and that’s pretty rare. But most investors hate drawdowns and just don’t do well with this reality (part of the reason why investing is so hard for most of us).
and then Meb stated (paraphrasing):
My question is this (while acknowledgeing maybe it's merely that I have a different definition of drawdown):To be a good investor you have to be a good loser. There are only two states--new highs and drawdowns and there's nothing in between.
Just because the market reaches a new high (say Dow 20,000 for example forgetting for a moment that the Dow is not the market) and then falls the next day (say to 19,990), does that really put you in a drawdown period? Sure your portfolio value is no longer "as high" as it was the day before but is that really a drawdown?
I would think a drawdown would be if you bought stock (or a fund/etf, etc.) when the price per share is (for example) at $50 and then it falls below that. You would be in drawdown until the price got back to $50 a share.
But if you bought at $25 a share and years later it gets to $50 a share and then falls to $40 or $30, is that really a drawdown? Aren't you still positive (up from where you bought)?
Maybe I'm just equating drawdown with "loss" and that's not what's intended. Any input is appreciated. Thanks.