How to survive a market crash

Every long-term investor will live through several market crashes. They are not a sign that something is broken — they are the price of long-term returns. What decides your result is what you do during them.

Before the crash

• Hold an emergency fund, so you never have to sell investments to pay bills.
• Size risky positions so that a 50% fall would hurt but not ruin you.
• Decide your rules in advance: rebalance, follow a trend signal, or simply keep investing monthly.

During the crash

• Do not make decisions from the news. Follow your written plan.
• Remember the maths: after −50% you need +100% — which is exactly why limiting the depth of losses matters, and why selling at the bottom locks them in.
• Keep investing your regular savings if your plan says so. Buying during declines has historically been rewarded.

After the crash

Review honestly: did your plan work, and did you follow it? If the drawdown was too much to bear, adjust your risk level for the future — not in the middle of the next crash.

How a trend rule helps

A trend-following rule exits a market once its downtrend is established and re-enters when the trend turns up. It will never sell at the top or buy at the bottom, but it aims to avoid the deepest part of long declines — which keeps many investors in the game. Compare the drawdowns of strategy vs buy & hold for 30 markets.

Key takeaways

• Crashes are normal; prepare before they happen.
• Follow rules, not headlines.
• Limit the depth of losses — and never lock them in by panic selling.

By Dr. Harry Hamann · 5 min read