Stocks don't make new highs every single day, so most of the time you're going to be underwater from your portfolio's high-water mark. Former hedge fund manager and applied mathematics professor Robert Frey gave a great talk on this subject, called 180 Years of Market Drawdowns (you can watch the talk here).
Frey highlights that even though markets trend higher over time, drawdowns happen all along the way. And they occur often. In fact, you are likely to be in a drawdown state more than 70 percent of the time; a quarter of the time the drawdown will be 20 percent or more.
That is the most important concept to get comfortable with: As an investor, you will constantly be in a drawdown state. Not coming to terms with this leads to second-guessing, which could prompt changes based on emotion. Behavioral finance tells us that most people look at their high portfolio value as the benchmark. If their portfolio went from $50k to $100k and then down to $90k, they feel as though they lost $10k rather than being up $40K. They then regret not having sold or done something differently.
A second takeaway is the importance of diversification, not just across different asset classes but different countries as well. Drawdowns can last a long time. The main stock index in Italy has been in one since 2000, and Japan's Nikkei since 1989! Any investor in those countries who has only invested in their home markets has experienced their own "great depression."