Crashes: where long-term returns are made — if you survive them

"Buy when there's blood in the streets" is one of the oldest rules in investing. It is true — and almost impossible to follow without preparation.

How often markets fall

Looking at the S&P 500 since 1993:

• Corrections of 10–20% happen every year or two.
• Falls of roughly 20–35% come every few years — most recently 2018, 2020 and 2022.
• Deep crashes of around 50% happened twice: 2000–2002 and 2007–2009.

Each one ended. Each one felt, at the time, like it might not.

Why crashes are opportunities

Prices fall faster than value. In a panic, investors sell good assets at any price because they need cash, are forced to by leverage, or simply cannot bear more losses. Those who have cash, no leverage and a plan can buy at prices that later look absurd.

How to be the buyer, not the seller

• Have dry powder — cash or bonds that are not needed for living costs.
• Have no forced sellers in your life — no margin loans, no money you need next year in stocks.
• Know your rule in advance — whether it is "keep buying monthly" or a trend rule that re-enters when the uptrend returns. Deciding in the middle of a crash rarely goes well.

A trend-following rule does both halves: it steps aside as a downtrend develops — protecting the capital — and buys back when the trend turns up, usually well below the old high.

Related: surviving drawdowns

By Dr. Harry Hamann · 5 min read