Staying Calm During Market Crashes
Crashes aren't disasters, they're normal. Here's how to prepare mentally and stay disciplined when fear peaks.
Staying Calm During Market Crashes
Key Takeaways
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Market crashes are normal and recoverable. A 10% drop happens roughly once a year. A 20% drop every 3–4 years. Every single crash has been followed by recovery. On a 30-year chart, they’re blips. Knowing this in advance makes panic less likely when it happens.
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Panic selling is permanent loss. Missing the 10 best days over 20 years cuts returns roughly in half. Those best days often come right after the worst days. You stay invested, you keep contributing, and you benefit from the recovery.
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Write your crash plan right now while you’re thinking clearly. Decide in advance what you’ll do. Will you keep investing? Will you rebalance? How often will you check? Once you’ve written it, follow it. Don’t make emotional decisions in the moment.
This Is Normal
Market crashes happen. Not if. When. This is so consistent that you can almost set a watch to it.
In a typical decade, you’ll see a 10% drop multiple times. Every three to four years, you’ll see a 20% drop. Every decade or so, you might see a 30% drop or worse. These aren’t anomalies. They’re how markets work.
Look at a 30-year chart of any major index. You’ll see dozens of downward spikes. They look scary in the moment. On a 30-year chart, they’re momentary dips. Every single one was followed by recovery. Every one.
The hardest part isn’t understanding that crashes happen. It’s remembering this fact when you’re looking at your portfolio down 25% and the news is screaming about financial collapse.
What Panic Costs You
A permanent loss sounds dramatic, but it’s literally what happens when you panic sell.
You bought a fund at €1,000. It drops to €800. That’s a temporary loss. If you hold it, it eventually goes back to €1,000 and beyond. The loss is temporary. The money comes back.
If you sell at €800 because you’re panicking, you’ve turned that temporary loss into a permanent loss. You’re out of the market now. The fund recovers, and you’re sitting in cash, not participating in the recovery. You’ve locked in the loss.
This is why the data on missing the best days is so striking. If you invested €10,000 at the start of a 20-year period and stayed invested, you might have €70,000. If you missed the 10 best days during those 20 years because you were out of the market during crashes or their immediate aftermath, you might have €35,000. Same investment. Vastly different outcome.
The cruelest part: the best days often come right after the worst days. The market crashes. It’s terrifying. You want to sell. The next week, it rallies hard. You missed it because you panicked.
You can’t predict when the best days will come. That’s why you stay invested through everything. You’re guaranteed not to miss them if you never leave.
Write Your Crash Plan Now
Right now. Not when you’re panicking. Now.
Write down what you will do if the market drops 20%. Will you keep investing? Most likely yes. You’re buying at discounts. That’s good.
Will you sell any positions? Almost certainly not, unless something fundamental changed about that company or fund.
Will you rebalance? Maybe. If your allocation got pushed way out of whack, rebalancing back to your plan makes sense.
Will you check your portfolio daily? No. You’ll check monthly at most. The daily movements are noise.
Will you read financial news? No. The media profits from drama. During crashes, the coverage is mostly fear. You don’t need that input.
Will you talk to anyone about your investments? Yes. Find someone calm. Someone who knows that crashes are normal. Someone who will remind you of your timeline and your plan. Sometimes you just need to hear from someone who isn’t panicking.
Write these decisions down. Make them concrete. Put them somewhere you can find them during the crash when your thinking is muddled.
What To Actually Do During a Crash
Keep contributing. This is the counterintuitive part. While everyone is panicking and selling, you’re buying. The market is on sale. You’re accumulating more shares at lower prices. Over the long term, that’s how you build wealth.
This assumes you have an emergency fund. You do, right? If a market crash somehow coincides with you losing your job, your emergency fund covers that. Your investments stay invested. You don’t panic sell to cover living expenses.
Rebalance if your plan says to. If you planned to be 70% stocks and 30% bonds, and stocks dropped so hard you’re now 60% stocks and 40% bonds, you might rebalance back to 70/30. That means selling bonds (which held up) and buying stocks (which are down). You’re automatically buying low and selling high. That’s the whole point.
But don’t use crashes as an excuse to suddenly become conservative. If you’re 30 years from retirement, this crash doesn’t change that timeline. You still need to be 80% stocks or wherever your plan said. Don’t panic into a different allocation.
Remembering Why You’re Here
Zooming out matters. Pull up a 50-year chart. See those scary drops? Barely noticeable. See the overall trajectory? Steadily up.
If you’re investing for a goal 20 years away, this crash is almost irrelevant to that timeline. You have so much time for recovery.
If your goal was retirement in 20 years, and you’re in year 5, a crash doesn’t change your timeline. You keep going. You keep investing. In year 20, that crash will have been recovered from so thoroughly you’ll barely remember it.
This is why goals matter. When you’re panicking, your goal brings you back. It reminds you why you’re here. It grounds you in something real beyond the temporary market noise.
If you’ve set up goal-based tracking with something like Gallio, crashes are actually easier to weather.
Your targets are already set. You’re not watching daily prices. You’re getting monthly briefings. You see your actual progress toward goals, not market hysteria. Alerts only come when targets are reached, not when markets move.
This structure removes emotion. You’re not watching the market spiral down. You’re just continuing your plan. You’re contributing. You’re holding. You’re letting the timeline work.
The less you check, the calmer you stay. The more you check, the more the temporary noise feels permanent and urgent. If you’re using a system that reduces checking and provides clarity, use it.
You’re Going to Be Fine
Market crashes have happened for centuries. Every investor who stayed disciplined through them came out fine. Every investor who panicked sold locked in losses.
You have an advantage. You know this now. You know crashes are normal. You know what to do. You can write your plan in advance.
Write it this week. Then trust it when the crash comes. It will come. You’ll be ready.
Staying Calm During Market Crashes
Key Takeaways
-
Market crashes are normal and recoverable. A 10% drop happens roughly once a year. A 20% drop every 3–4 years. Every single crash has been followed by recovery. On a 30-year chart, they’re blips. Knowing this in advance makes panic less likely when it happens.
-
Panic selling is permanent loss. Missing the 10 best days over 20 years cuts returns roughly in half. Those best days often come right after the worst days. You stay invested, you keep contributing, and you benefit from the recovery.
-
Write your crash plan right now while you’re thinking clearly. Decide in advance what you’ll do. Will you keep investing? Will you rebalance? How often will you check? Once you’ve written it, follow it. Don’t make emotional decisions in the moment.
This Is Normal
Market crashes happen. Not if. When. This is so consistent that you can almost set a watch to it.
In a typical decade, you’ll see a 10% drop multiple times. Every three to four years, you’ll see a 20% drop. Every decade or so, you might see a 30% drop or worse. These aren’t anomalies. They’re how markets work.
Look at a 30-year chart of any major index. You’ll see dozens of downward spikes. They look scary in the moment. On a 30-year chart, they’re momentary dips. Every single one was followed by recovery. Every one.
The hardest part isn’t understanding that crashes happen. It’s remembering this fact when you’re looking at your portfolio down 25% and the news is screaming about financial collapse.
What Panic Costs You
A permanent loss sounds dramatic, but it’s literally what happens when you panic sell.
You bought a fund at €1,000. It drops to €800. That’s a temporary loss. If you hold it, it eventually goes back to €1,000 and beyond. The loss is temporary. The money comes back.
If you sell at €800 because you’re panicking, you’ve turned that temporary loss into a permanent loss. You’re out of the market now. The fund recovers, and you’re sitting in cash, not participating in the recovery. You’ve locked in the loss.
This is why the data on missing the best days is so striking. If you invested €10,000 at the start of a 20-year period and stayed invested, you might have €70,000. If you missed the 10 best days during those 20 years because you were out of the market during crashes or their immediate aftermath, you might have €35,000. Same investment. Vastly different outcome.
The cruelest part: the best days often come right after the worst days. The market crashes. It’s terrifying. You want to sell. The next week, it rallies hard. You missed it because you panicked.
You can’t predict when the best days will come. That’s why you stay invested through everything. You’re guaranteed not to miss them if you never leave.
Write Your Crash Plan Now
Right now. Not when you’re panicking. Now.
Write down what you will do if the market drops 20%. Will you keep investing? Most likely yes. You’re buying at discounts. That’s good.
Will you sell any positions? Almost certainly not, unless something fundamental changed about that company or fund.
Will you rebalance? Maybe. If your allocation got pushed way out of whack, rebalancing back to your plan makes sense.
Will you check your portfolio daily? No. You’ll check monthly at most. The daily movements are noise.
Will you read financial news? No. The media profits from drama. During crashes, the coverage is mostly fear. You don’t need that input.
Will you talk to anyone about your investments? Yes. Find someone calm. Someone who knows that crashes are normal. Someone who will remind you of your timeline and your plan. Sometimes you just need to hear from someone who isn’t panicking.
Write these decisions down. Make them concrete. Put them somewhere you can find them during the crash when your thinking is muddled.
What To Actually Do During a Crash
Keep contributing. This is the counterintuitive part. While everyone is panicking and selling, you’re buying. The market is on sale. You’re accumulating more shares at lower prices. Over the long term, that’s how you build wealth.
This assumes you have an emergency fund. You do, right? If a market crash somehow coincides with you losing your job, your emergency fund covers that. Your investments stay invested. You don’t panic sell to cover living expenses.
Rebalance if your plan says to. If you planned to be 70% stocks and 30% bonds, and stocks dropped so hard you’re now 60% stocks and 40% bonds, you might rebalance back to 70/30. That means selling bonds (which held up) and buying stocks (which are down). You’re automatically buying low and selling high. That’s the whole point.
But don’t use crashes as an excuse to suddenly become conservative. If you’re 30 years from retirement, this crash doesn’t change that timeline. You still need to be 80% stocks or wherever your plan said. Don’t panic into a different allocation.
Remembering Why You’re Here
Zooming out matters. Pull up a 50-year chart. See those scary drops? Barely noticeable. See the overall trajectory? Steadily up.
If you’re investing for a goal 20 years away, this crash is almost irrelevant to that timeline. You have so much time for recovery.
If your goal was retirement in 20 years, and you’re in year 5, a crash doesn’t change your timeline. You keep going. You keep investing. In year 20, that crash will have been recovered from so thoroughly you’ll barely remember it.
This is why goals matter. When you’re panicking, your goal brings you back. It reminds you why you’re here. It grounds you in something real beyond the temporary market noise.
If you’ve set up goal-based tracking with something like Gallio, crashes are actually easier to weather.
Your targets are already set. You’re not watching daily prices. You’re getting monthly briefings. You see your actual progress toward goals, not market hysteria. Alerts only come when targets are reached, not when markets move.
This structure removes emotion. You’re not watching the market spiral down. You’re just continuing your plan. You’re contributing. You’re holding. You’re letting the timeline work.
The less you check, the calmer you stay. The more you check, the more the temporary noise feels permanent and urgent. If you’re using a system that reduces checking and provides clarity, use it.
You’re Going to Be Fine
Market crashes have happened for centuries. Every investor who stayed disciplined through them came out fine. Every investor who panicked sold locked in losses.
You have an advantage. You know this now. You know crashes are normal. You know what to do. You can write your plan in advance.
Write it this week. Then trust it when the crash comes. It will come. You’ll be ready.