Should I Invest During War or Geopolitical Crisis?

Geopolitical crises -- wars, territorial conflicts, sanctions, and political upheavals -- create intense fear that paralyzes investors. The instinct to sell everything and hide in cash feels like prudent risk management. But history tells a dramatically different story, and the greatest investors have consistently made their best investments during the darkest geopolitical moments.

Warren Buffett addressed this directly in his 2015 shareholder letter: "During the 20th century, the United States endured two world wars, the Great Depression, a dozen recessions and financial panics, an oil embargo, a flu epidemic, and the resignation of a disgraced president. Yet the Dow went from 66 to 11,497." Buffett's point is not that crises don't matter -- they cause real human suffering. His point is that investors who sold during every crisis lost far more than the crises themselves cost.

The historical data is unambiguous. Stocks purchased during major geopolitical crises have consistently produced above-average returns over subsequent years. The S&P 500 purchased during the Cuban Missile Crisis (October 1962), when nuclear war seemed imminent, was up 30% within 12 months. Stocks bought after the 9/11 attacks (September 2001) were up over 20% within a year. Stocks bought during the Russia-Ukraine conflict initial shock (February 2022) had recovered fully within 18 months.

Buffett explained why this happens: "During a crisis, the difference between a great business and a mediocre one becomes larger, not smaller. The great businesses survive and emerge stronger. And they become available at bargain prices because fearful sellers don't distinguish between quality and junk."

Charlie Munger frames geopolitical fear as a variant of the availability bias: whatever crisis is currently in the news feels like the most dangerous moment in history, because it is the most visible. But every generation has felt the same way about their crises, and the long-term trend of economic growth and human progress has always prevailed.

## Your 5-Step Action Plan

**Step 1: Study Historical Precedents.** Before making any decision, look at what happened to stock markets after previous geopolitical crises: WWI, WWII, Korean War, Cuban Missile Crisis, Vietnam, Oil Crisis, Gulf War, 9/11, Iraq War, COVID. In every case, stocks recovered and went to new highs. This historical perspective provides emotional armor.

**Step 2: Separate Investment Decisions from Emotional Reactions.** Your fear is valid -- geopolitical crises are genuinely frightening. But fear is not an investment thesis. Write down specifically what economic impact the crisis will have on the businesses you own. If you cannot identify specific, quantifiable damage to your companies' earnings, the fear is emotional, not analytical.

**Step 3: Continue Your Regular Investment Schedule.** If you were investing $1,000 per month before the crisis, continue investing $1,000 per month during the crisis. Dollar cost averaging during geopolitical crises has historically been one of the most profitable investment strategies available.

**Step 4: Look for Bargains in Quality Companies.** During crises, even great companies decline in price. Build a watchlist of businesses you would love to own at the right price, and check if any have reached attractive valuations. Buffett made his legendary Goldman Sachs investment during the 2008 crisis and his Bank of America investment during the European debt crisis.

**Step 5: Zoom Out to the 20-Year View.** Will this crisis matter to your portfolio in 20 years? The answer is almost certainly no. Every crisis that felt like the end of the world was eventually absorbed by the relentless forward march of economic growth, innovation, and human adaptation.

### The Bottom Line

Geopolitical crises feel uniquely dangerous in the moment, but they follow a consistent historical pattern: sharp initial fear, market decline, resolution (partial or complete), and full recovery to new highs. Investors who maintain discipline and continue investing through crises consistently outperform those who sell in fear. As Buffett says, "In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497."