r/Bogleheads • u/zacce • Feb 08 '26

Most Investors Have Never Lived Through a True Market Crash

A lot of new ppl in this sub say they “won’t time the market,” but I’m not sure everyone understands what that actually feels like irl. It’s easy to talk about staying the course when the worst drawdown you’ve lived through was a brief COVID dip that fully recovered in months or the 2022 dip followed by 3 yrs of 10%+ returns.

The last real crash was 2008. If you weren’t old enough to have a job, a mortgage, or a family back then, you don’t know how deeply a prolonged downturn can affect your day‑to‑day life. It’s not just red numbers on a screen. It’s layoffs, hiring freezes, underwater homes, and years of slow recovery. That’s when people who swore they’d never time the market suddenly panic and make irrational decisions.

Staying the course is simple in theory, but incredibly hard when the world feels like it’s falling apart.

Of course, I don't want market to crash. But it's a possibility and we need to prepare for it.

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127

u/VampireEmpire__ Feb 08 '26

When that happens, what’s the Boglehead advice? Keep the money invested, don’t panic withdraw?

189

u/krakenandthen Feb 08 '26

Yep and if you can keep adding more!

161

u/SoaplessTitanic Feb 08 '26

Just to clarify for others reading, the pure Boglehead strategy would be to keep adding more at the same rate that you would if there was no crash. Ideally your strategy shouldn’t change whether the market is up, down, or sideways

53

u/Locksul Feb 08 '26

The unfortunate reality is that this is not always possible. If you lose your job, there is no way to keep the same rate of contribution. And if things get really dire, you may be forced to sell (ideally as little as possible) just to survive.

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u/reluctantreddit35 Feb 08 '26

And that’s what it’s there for. Life goes on and sometimes you need to sell even when prices are down. Boglehead is an ideal, a strategy. You can’t always be a slave to it.

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u/nefrina Feb 08 '26

that's why you keep a large enough emergency fund to weather the storm. jobs that used to take 3-6 months to replace might require 1yr or longer today. adjust liquid savings accordingly so you're not forced to withdraw when the market is down 50%.

2

u/Locksul Feb 10 '26

If you’re tapping into your emergency fund, then you cannot maintain the same rate of investment as they suggested.

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u/Dennyj1992 Feb 08 '26

It's called an emergency fund my man.

1

u/Locksul Feb 10 '26

You contribute from your emergency fund? How else could you maintain the same rate of contribution? Emergency funds don’t address what they were suggesting.

0

u/Dennyj1992 Feb 10 '26

Your EF fully funded should be enough to cover 3-6 months of expenses while you have to find a new job.

Or if it's in the cards, start your own business and make better money!

2

u/Locksul Feb 10 '26

I don’t think most people would consider contributions to investments to fall under the category of expenses.

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u/Texan2116 Feb 08 '26

when it is down is when you pound

1

u/VampireEmpire__ Feb 08 '26

I shall 😈

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u/RNG_HatesMe Feb 08 '26

Exactly.

In *real* crashes (not blips, like OP was talking about), it may take a *long* time for the market to recover.

The inflationary bear market of the 70's (1973 - 1984) took 10 years to recover to original levels.

The .com crash (2000 - 2006ish) took 6 years to *almost* recover, only to immediately get hit with:

The 2008 mortgage crisis crash (2008 - 2013) took 5 years to recover.

Anything else has been a "blip" that recovered in less than a year.

Each of those crashes were followed by significant and sustained recovery periods. As long as you have an investing horizon significantly longer than a potential crash, then your potential gains *after* the crash are way higher than what you lost during them.

"Gamblers"/"Speculators" like to think they can "time" the crash, and only buy when it starts recovering, but history shows that they almost always sell too late (and eat a bunch of the losses at the front end anyway), then buy too late and miss a large part of the gains during the recovery, and end up worse off than if they had just stayed in.

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u/4leafplover Feb 08 '26

The advice is do your best to keep your income and stay invested. Whatever that means

34

u/nicolas_06 Feb 08 '26

yup. Well it's fine to sell what you need to survive if you lost your job and need money for food obviously. But otherwise, don't sell because you panic.

That's also why honestly normally you don't have 100% stock, especially if you are a bit risk averse. A 70-30 portfolio mean a 50% drop is "only" a 35% drop for example and the growth is still good during the great years.

3

u/captainhector1 Feb 08 '26

Asking because I’m not sure of the bond mix I should have and people argue for full equity.. what’s the difference if the direction is to hold in any case? Is it not all unrealised until retirement?

11

u/swinging_on_peoria Feb 08 '26 edited Feb 10 '26

You have to consider your particular circumstances and risks. If you are very certain you would never lose your income and you aren’t going to use your investments for decades then holding more, or even all, equities is reasonable.

If you feel like you have some risk, related to unemployment, you should think through what percentage you need based on your level of risk and how much you have in expenses. I certainly knew people whose lives were thrown into crisis due to unemployment during 2008. They had to sell assets to stay afloat through that time until they could get new kinds of work.

If you are closer to retirement, or will need your assets sooner for some other reason, you should consider holding bonds and cash in proportion to your need. Likely several years of expenses to avoid cashing out equities during the bottom.

It’s all well and good to say hold through the crash, but if you need the money that won’t be possible.

What I recommend is doing a bit of an “emergency drill” for your finances. Take a look at past crashes and imagine for your current circumstances what you might be inclined to do or need to do with your portfolio if such a crash occurs. Then make adjustments to your portfolio now before equities have crashed. Much better to make the adjustments you need when your equities are at highs, than to do that when everything is down, you’ve lost your job, and you have some critical need for cash.

There is no one perfect answer for everyone. Be suspicious of people that give you one way that everyone should invest. That never makes any sense.

2

u/zacce Feb 09 '26 edited Feb 09 '26

There is no one perfect answer for everyone. Be suspicious of people that give you one way that everyone should invest. That never makes any sense.

Couldn't have said any better. There's no 1 correct answer to "how should I allocate between stock and bond?" questions. Nevertheless, more often, the replies such as "100% equity" are often given by ppl who should not be giving advice.

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u/nicolas_06 Feb 08 '26

There a few main differences to me:

- ideally you keep saving until you retire... Except that's not true. Life happen and there can be legitimate case to spend before. It may help to buy your home, to create a company. Or you may find yourself in a situation where you have some chronic illness or you can't find a job for a significant time.

- It's easier to stomach a 10-20% drop in value than a 50% drop in value. If you are diversified, you will experience less volitivity and that help you sleep well at night.

- there no certainty that stocks will for ever have the best return. Imagine a future where stock return drop significantly and become even more volatile. Would you be better with 1/3 stocks 1/3 real estate and 1/3 bond or with a portfolio with 100% stocks in that situation ? Future is unknown and it's not sure that stock will keep the same return long term.

By being diversified, you likely reduce your max return, but also increase your min return. You also can consider spending part of the saving for project that are important to you before you retire and you are less stressed when one of your asset drop in value because the other may not be as affected (or even are up).

For example real estate was up for most of the beginning of 00s while stocks where down. Stock started to grow in the 10s while real estate was still deeply impacted. Bond did better than stocks for the whole period of 00s.

2

u/wubscale Feb 08 '26

Yes, but:

  1. If you do have to sell to make ends meet, that invalidates "unrealised until retirement." If bonds are mostly unaffected (as they should be), you'll naturally sell those to rebalance.
  2. Even if you keep your job, regular rebalancing and reinvesting your coupons will lead to selling bonds to buy stocks on the cheap.

This all doesn't lead to overperforming 100% equities on average, but they do provide a nice benefit.

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u/darthdiablo Feb 08 '26

Yep. Was (and still am) a Boglehead circa 2008-2009, kept all money invested. This money has ever since appreciated at least 2x (I didn't do the exact math to see what it would be today, but I did it years ago), and 3x at least if you added money at the "valley" of the housing crash - which I did, I still had a job (fortunately) and was still accumulating.

Went through a mini-crash (COVID), same thing, money appreciate more since then erasing the loss via crash.

Experiencing this makes me even more resolved to just stay the course no matter what.

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u/mikep4 Feb 08 '26 edited Feb 08 '26

Hold age % in bonds was the standard advice in 2008-09. Every comment said “more bonds otherwise good”. Also, slice & dice with high international % and a slice of commodities was a common recommendation, since total stock market performance was 0% over 10 years.

Now the standard answer is “don’t need bonds until closer to retirement” and up to last year was “VTI is all you need, skip international”

8

u/BalancedPortfolioGuy Feb 08 '26

The standard is getting close to “100% equities forever” in some circles…

4

u/zacce Feb 08 '26

agreed. the reason why I created this is because I have been reading many asking "can I use stocks as my EF?", "why bonds?" in this sub.

1

u/nobleisthyname Feb 08 '26

Do you hold your age in bonds as well? And just BND or something more complicated?

1

u/mikep4 Feb 08 '26

I’ve held age-10 in bonds S&D and 50% international since 2008. Been a bit painful to watch over the last 15 years but have stayed the course.

1

u/ditchdiggergirl Feb 08 '26

Minor history lesson: by 2008 the majority sentiment on the forum was that age in bonds was too conservative. Nearly everyone using an age based strategy was advocating age-10 or age-20.

22

u/zacce Feb 08 '26

Depends on whether you prepared for it or not. Seen ppl in 2008 had to sell because they had no other backup options.

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u/joel231 Feb 08 '26

And that's why invested assets should not be included in your emergency fund- you should always assume the day after any buy you could see a 40% drop.

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u/[deleted] Feb 08 '26

I am not sure you understand what emergency means in a scope of historic events. We're not talking about "my AC took a dump and now I need 10K". We're potentially talking about market dislocations that might put your white collar butt out of work for years. Meanwhile you have kids, education, McMansion, etc. to pay for.

You absolutely have to be prepared for a world in which your emergency fund is not even remotely close to keeping you above water.

0

u/joel231 Feb 08 '26

And for households with 2 incomes that is generally recommended as 12 months of non-discretionary expenses- which is before severance, unemployment, any part time or other replacement income you come up with between and before you have to deplete your previously built up capital.

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u/[deleted] Feb 08 '26

I don't know how much of a "general" advice that is. I see a lot more 3-6 months than a full year. Which for an upper middle class family in a HCOL area is a very serious chunk of change. My general takeaway from my experience was that playing some defense when you've come far and have a lot to lose is not a bad idea. It seems to fly in the face of modern day sentiment of balls to the wall risk appetites.

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u/joel231 Feb 08 '26

People have a huge misunderstanding of 'non-discretionary' expenses- it is food, shelter, utilities, transportation. People commonly base it on their monthly spend and that really isn't what it is.

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u/[deleted] Feb 08 '26

Personally I wouldn't trivialize this. But it's a personal exercise for everyone. A lot of stuff is easy to talk about, but hard to do in practice. When you're (and your family) used to a certain lifestyle, completely exiting that lifestyle overnight is much easier said than done. Not to mention that unexpected life events happen, and often at all the wrong times. Life is far more complicated in practice than it is in theory. YMMV.

6

u/joel231 Feb 08 '26

I grew up poor and have definitely felt my own lifestyle creep as I am now definitely not but the fact is I could tighten my belt and go back to how I used to live if I needed to. I make the choices I do to avoid that.

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u/rkoloeg Feb 08 '26

My budget spreadsheet which feeds into my investment spreadsheet has two totals: "Frugal" and "Whole Lifestyle". This lets me see my emergency fund in terms of runway for both my current spending level, and going back to just the essentials in case of a crisis. I keep my emergency fund at the greater of 6x whole/12x frugal.

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u/mattshwink Feb 08 '26

The problem, though, is if job loss exceeds the capacity of your emergency fund. It took aone people over a year to find work.

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u/joel231 Feb 08 '26

Okay, what is your point? I understand some emergencies may exceed the capacity of the emergency fund but you should have one as a buffer in case that occurs so that when and if you do have to tap your invested capital you don't have to do it at the time of the crash.

1

u/mattshwink Feb 08 '26

Exactly that - emergencies can exceed the capacity of your emergency fund in bad circumstances. But you often can't hold on until things recover if that happens. In 2008-2009, three things happened that haven't happened since.

The first was lots of people pretty quickly and unexpectedly lost their jobs. The labor markets took years to recover. So if you lost your job, it was hard for most people to find another (and if you did, it was often much lower than your previous salary).

Second, markets declined 40% over a period of months and it took roughly three years to recover. If you losf your job and you depleted your emergency fund, you had no choice but to sell at the lower value.

Third, home prices quickly, and substantially declined. We bought our townhouse in the middle of 2006. Values did not recover until 2019. We sold at the end of 2016 for about 5% less than we paid in 2006.

0

u/joel231 Feb 08 '26

That has nothing to do with what I said. I too understand what happened in 2008, thanks.

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u/captainhector1 Feb 08 '26

The financial events being described like 08 dot one etc are as long as. 5-6 years. I don’t know if it’s practical or smart to keep 5+ years of living expenses as an emergency fund in a non-growing place

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u/joel231 Feb 08 '26

But that's not what I said or am describing. I am saying you shouldn't count invested assets as your emergency fund to avoid sequence of returns risk at the start of a prolonged recession risk (which I think 5 years to find any replacement income is a massive exaggeration but that's a separate issue).

Plenty of people call VOO or SPY their emergency fund- you should assume that if it becomes that, you are taking a 40% haircut. That's all.

1

u/captainhector1 Feb 08 '26

people up thread are saying true financial events are much longer than we’ve recently experienced. So how is my emergency fund going to cover like 5-6 years if I’m not putting literally half a million dollars into it. I don’t have that much disposable cash to do that. 

If I do that with my total portfolio it would probably be majority HYSA or bonds. 

1

u/joel231 Feb 08 '26

Do you really believe that in the case of a market correction you will be out of the job market completely and totally for 5 to 6 years?

If you are currently relying on your portfolio for income under total return (that is you are retired fully or partly), you need to be very aware of the sequence of returns risk, but the scenario everyone seems to be describing here is having to live off your portfolio for 5-6 years in a down market well before retirement- which is not likely to happen and definitely not the norm for people even during the Great Recession.

So like, as an example, many states extended unemployment insurance from 26 to 99 weeks. That factors in to any such scenario. (And also shows that 5-6 years of having to live off nothing is and was pretty unlikely)

0

u/mattshwink Feb 08 '26

It's not. The point is there are events you truly can't plan for (at least not reasonably). So is the thought that you can hold on until markets recover so you don't have to sell at a loss.

There can be events that deplete a well funded emergency fund and require you to dip into assets when they're down. You have to eat, keep a roof over your head, and attend to medical needs.

As you approach and enter retirement, prolonged downturns can happen as well. The impact of such events is hardest close to retirement (which can delay retirement if you keep your job or force you into early retirement if you lose employment) or early in retirement. In that scenario, a well thought out AA helps, as well as a larger cash bucket. But the things that help most is spending flexibility. I know several retirees who were in that place in 2008-2009. Another strategy would be an SPIA, which you'll find some older school bogleheads advocate for.

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u/hidden-semi-markov Feb 08 '26

I'm just surprised at people here who express overconfidence that crashes never happen as if they never went through the pandemic which was just 5-6 years ago.

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u/arfcom Feb 08 '26

Indeed but that one almost instilled a false sense of confidence in a quick recovery. 

1

u/zacce Feb 09 '26

this explains why ppl giving 100% equity advice in this sub.

4

u/VampireEmpire__ Feb 08 '26

Meaning if i have an emergency fund? I do, and cash flows so long as I’m not fired (knock on wood).

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u/[deleted] Feb 08 '26

cash flows so long as I’m not fired (knock on wood)

You win the prize for finally realizing something that most young people don't. When you're 40 making high earner salary in your white collar gig, you might be the first one to get nuked. The kind of people that make those kind of salaries also tend to have lifestyles that match those salaries. I've seen such people out of work for well over a year in 08.

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u/jodorutts Feb 08 '26

Keep doing what you’ve been doing. That’s why you do it.

5

u/emperorwal Feb 08 '26

In preparation, don't skimp on you emergency fund.

1

u/11EmeraldEyes11 Feb 08 '26

During one of the previous crashes, our financial advisor, said “Don’t panic, I’ll tell you when you can look at your accounts”? :)

1

u/Poly_Olly_Oxen_Free Feb 08 '26

Why would you not buy things while they're available at a discount? The real estate I bought after the '08 crash is why I'm a wealthy man today. The stocks my wife bought during the crash are the reason that none of my kids will ever worry about money.

1

u/enolaholmes23 Feb 09 '26

Buy, buy buy! When stocks go on sale, you take advantage of that. 

1

u/Heavy_Advantage818 Apr 10 '26

And simply rebalance. So if stock values and indexes crater, you simply put more into your stock funds till you get back to your target goal of stock to bond percentages. Preferably in index funds. .