What to do when the market crashes (a calm checklist)

At some point your portfolio will fall — maybe 10%, maybe 30%. It feels awful, and that feeling is the real danger, because the worst decisions get made in those moments. The good news: history is full of crashes, and markets have recovered from every one so far. Your job is to not turn a paper loss into a permanent one.

The calm checklist

• Don't panic-sell. Selling in a fall locks in the loss and you miss the recovery, which often comes fast and early.
• Check your timeline. Money you don't need for years can ride this out. Money you need soon shouldn't have been in shares to begin with.
• Keep investing if you can. Your regular contributions now buy more for the same dollars.
• Reread why you bought. If the long-term reasons still hold, a lower price changes the mood, not the plan.

The mistake to avoid

Trying to 'get out and back in at the bottom' sounds smart and almost never works — you have to be right twice, and fear tends to keep you out exactly when the rebound happens. Sitting still is boring, and boring is usually the winning move.

Crashes transfer shares from people who panic to people who are prepared.

The best protection is set up before the storm: knowing your real exposures and holding only as much risk as you can stomach. Then a crash is unpleasant, not catastrophic.

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