Markets go up. Markets go down. We know this, and yet when it happens, people still run around in shock saying, “How could this happen?”

Historically, equity markets have delivered outstanding long-term returns – but investors must pay the price in the form of short-term volatility. These periods of short-term volatility should not be confused with the demise of capital markets.

Stocks and bonds are the two main ingredients in all balanced portfolios. Traditionally, investors think of stocks as the more risky of the two assets, while bonds are perceived as a safe haven. For most of the last 30 years, that has been true. But it’s important for investors to understand that bonds, too, carry risk – indeed, as Warren Buffett put it recently, “Right now bonds should come with a warning label.”