How to Survive a Stock Market Crash

Stock market crashes are not unusual events; they are an unavoidable feature of the asset class. The S&P 500 has had a drop of twenty percent or more roughly every five to seven years on average, and recoveries have always come, though sometimes painfully slowly. The investors who actually capture long-term equity returns are the ones who can sit through the downturns without selling.

The single most powerful tool you have is to never check your portfolio during a panic. Pre-commit to your asset allocation in writing during calm times so that future-you cannot rationalize a sale at the bottom. Continue automatic contributions; buying more shares while prices are depressed is one of the highest-return moves available.

Rebalance to your target allocation, which mechanically forces you to buy stocks when they are cheap and trim them when they are expensive. Avoid financial media during the worst of it. Crashes feel like ends-of-the-world while they are happening and look like buying opportunities in hindsight. Behave accordingly.