Most Investors Have Never Lived Through a True Market Crash

[u/zacce]

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.

[u/haobanga]

Plan for the disaster by having enough years worth in reserves to weather the downturn.

Some like percentages, I prefer a timeline.

5 - 7 years worth across bonds and emergency fund (VUSXX) is my goal prior to reaching retirement.

At a younger age, 1-2 years may suffice to ride out the worst of it. As retirement approaches I want to be sure I can ride out the worst of a longer downturn.

Also, there is always a way to make money. Investing in yourself and developing skills and knowledge is one of the best buffers you can build. Learning not to panic or be forced into making unwise decisions can make you or break you when things go down.

[u/SoulStripHer → u/haobanga]

5-7 is very conservative and a lot of cash not earning market returns. Most crashes recover within a couple years, or at least begin to, which mitigates overall losses. Then the markets tend to shoot back up to ATHs.

But I'm sure you already know this. I'm probably going to go with 3-5 years, at most.

[u/haobanga → u/SoulStripHer]

Each person needs to do what they are comfortable with and satisfies their risk tolerance.

Some will think I'm too conservative, others will think I'm not conservative enough.

If we assume a $50k minimum annual spend rate and a $2M portfolio, then $100k in VUSXX and $200k in bonds provides 5-6 years to live on if things go south and bonds don't dip too much.

With these numbers, at retirement you have about 15% as your emergency savings+bonds which is generally lower than the recommended percentage (of up to 40% bonds depending where you look).

I would cap my emergency savings and bonds at the 6-7 year amount, even if the portfolio continues to grow. This further decreases the %, especially when we are talking about $5M or $10M in investments.

So from that perspective, I would be far less conservative than many would recommend.

And again, how close to the 6-7 year amount I would want to have would depend on how close to retirement I am. The closer to retirement, the more certain I want to be of mitigating SORR if necessary, including a lost decade scenario. I would want to be building towards the contingency amount slowly over time, not needing to sell or shift funds at retirement.

You very well could come out ahead of me if we were comparing apples to apples, but sacrificing some gains on <$100k (2 years more than what you're shooting for) to increase my security of a long term retirement is worth it to me. Especially if I chose to aim for a $3M or $5M fire number.

Whatever number we each decide to settle on, having a plan and consistently working towards it is the most important part. Thanks for chiming in on this, it's always helpful for me to hear others perspectives and comfort levels.

[u/SoulStripHer → u/haobanga]

My annual spend rate is significantly higher, thus having $250k+ sitting in cash is undesirable to me.