Step away from the edge.
If you're a long-term investor, there's nothing to fear in February's market drop.
Yes, volatility is on the rise. And sure, days like Monday and Thursday, single sessions when the S&P 500 shed around 4% of its value, are unsettling. But they're not as rare as most investors think.
Let's look at the actual statistics.
While days where the S&P 500 shed 3% or more of its market value only make up around 1% of total trading sessions since early 1987, that statistic masks how those days cluster together. The S&P 500 is around 60-times more likely to experience another 3% or worse selloff if it's within 20 sessions of another similar-sized selloff.
In other words, nearly all big corrective sessions tend to cluster together.
This nonstop selling may seem like a crescendo of capital destruction, but it's actually fairly normal for a correction regime in the broad market.
In terms of the scale and speed of the current drop, things don't actually look all that different than other post-2008 drawdowns:
The latest S&P 500 drawdown is still not quite at the level of the pair of sharp corrections the market saw back in 2015.
Maybe even more telling, the deep corrections in the broad market in the last six years have come on a fairly evenly spaced time horizon. Simply put, there's at least some order to the chaos.
The old saying goes that "this time it's different" are the four most expensive words in the English language. So, if the correction we're experiencing really isn't any different than other recent stock market drawdowns, why does this one feel so different?
Recency bias is a major factor.
Simply put, any investor who's been in the market for the last 18 months or so has been in a regime where stocks can only move up and to the right. Heading into February, the S&P 500 had gone 511 days without seeing a 2% single-day drop.
Just to put that in context, seeing that is a whole lot rarer than seeing two 3%+ selloffs within the same month.
Investors who anchored themselves to the "normality" of the market's bull run are getting shaken up right now. That's just human nature. It's how we're programmed - and it's precisely why trading in the market is only easy in hindsight.
The good news for long-term investors is that time is an ally. This chart from David Blanchett in the Journal of Financial Planning sums it up nicely:
As your time horizon for investing expands, the volatility of your returns reduces. And, critically, the worst-case scenario for owning stocks gets dwarfed by the upside potential.
When investment success is measured over months and years, measuring results in days or weeks is a good way to make yourself insane. This correction might "feel" worrying, but, so far, the data doesn't signal anything out of the ordinary.