How to survive a market crash without wrecking your returns

If you invest for long enough, you will see your portfolio fall sharply. Global stock markets have dropped by a third or more several times in recent decades — in 2000–2002, 2008–2009 and briefly in 2020 — and smaller falls of 10–20% are routine.

What matters isn’t avoiding crashes. It’s not letting them push you into decisions you’ll regret.

What usually happens

• Falls feel faster and scarier than rises. Headlines get louder at exactly the wrong moment.
• Some of the strongest days often come shortly after the worst ones. Investors who sell in panic frequently miss the rebound.
• Broad, diversified markets have historically recovered and gone on to new highs — though recovery can take years, and in single countries it has sometimes taken decades.

The mistakes that make losses permanent

1. Selling after the fall. A paper loss becomes a real one, and you then face the impossible choice of when to get back in.
2. Stopping your monthly investing. Crashes are when your fixed amount buys the most units.
3. Investing money you’ll soon need. If you’re forced to sell in a crash to pay rent, the crash wins.
4. Using leverage. Margin and CFDs can turn a temporary fall into a wiped-out account.
5. Checking prices constantly. It turns normal volatility into stress.

A crash plan, written in advance

Write this down while markets are calm:

• My emergency fund covers ___ months of expenses, outside the market.
• My investing horizon is ___ years.
• If markets fall 30%, I will: keep my monthly investment going, not sell, and not check my account more than once a month.
• I will only change my plan if my life situation changes — not because of the news.

Use the community

Talking to other long-term investors during a crash helps. So does remembering why you invested in the first place. Join the shoal.

The short version

Crashes are the price of long-term returns. Keep an emergency fund, invest only money you won’t need for years, keep investing through the falls, and don’t sell in a panic.