For us long-term investors, we may find ourselves having to sell some stocks during a market drawdown.

It's an unpleasant thought I've had since early April, when the S&P 500 fell by around 20% from its Feb. 19 all-time high.

But does it always make sense to think of a 20% decline in your stock portfolio as a loss?

A common answer is that it's not a loss until you sell. This is the distinction between a realized loss and an unrealized loss.

But even if you sell during a bear market, do you really lose 20%?

For many long-term investors, there's a case to be made that the answer is no.

Reframing how we think about market drawdowns 🤔

At its April 7 intraday bottom, the S&P 500 reached a low of 4,835.04. This was the lowest level since Jan. 19, 2024.

In the context of my personal stock portfolio, which almost totally consists of purchases of S&P 500 index funds, I made three observations at the time:

• All of my trades since January 2024 were in the red.
• All of my trades from 2005, when I opened my first 401(k) account, through 2023 were profitable.
• I put much more money to work from 2005 to 2023 than I did from 2024 to 2025.

To help understand this, see the chart below of the S&P 500 since 2005. The dotted line demarcates the S&P's April low of 4,835.

Over 95% of the contributions I've made to my retirement accounts occurred when the stock market was much lower than the April 2025 low.

This means I still earned a substantial positive return investing in the stock market throughout my adult life. Even the purchases I made near market peaks before the global financial crisis and the COVID-19 pandemic were significantly profitable trades.

This is a roundabout way of saying that I'm thinking more about my cost basis. Since I made most of my purchases when the stock market was much lower than where it's trading today, my average cost basis is very low.

This doesn't actually change anything, Sam 🤨

To be clear, reframing how you think about the performance of your investments does not change the actual performance of your investments.

Sure, I'm still very much in the money. But there's also no denying that at the April 7 low, the value of my portfolio was still down about 20% from its peak.

If you are a stone-cold, totally rational investor, then this discussion was perhaps a waste of time. But I think most of us benefit from some perspective when faced with jarring drops in our portfolios.

For me, thinking about how much I'm up relative to my cost basis has been much more positive on my mental health than thinking about how much I'm down from the market's peak.

Investing in the stock market is an unpleasant process. We do what we can to cope with the tougher times.

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I joined Ryan Detrick and Sonu Varghese on the Facts vs. Feelings podcast! We discussed economic signals, market psychology, data quality, AI, how to find great pizza in NYC, and more!

Catch it on Spotify, Apple Podcasts, and YouTube!

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