What to Do When the Stock Market Crashes

We get it -- watching your portfolio plummet is terrifying, and every instinct screams to sell everything before it gets worse. That feeling is completely normal. But here is what the greatest investors in history want you to remember: real wealth is created during market crashes, not destroyed.

Warren Buffett's most famous principle applies directly: "Be greedy when others are fearful." This does not mean recklessly buying into a falling market. It means refusing to panic-sell quality businesses just because their prices have temporarily dropped. The businesses behind your stocks did not lose their value overnight -- they are still selling products, generating revenue, and serving customers.

Howard Marks reminds us that the biggest investment mistakes are psychological, not analytical. When markets crash, your brain enters fight-or-flight mode, and that survival instinct -- useful for escaping predators -- is catastrophic for your portfolio. The investors who build lasting wealth are those who can override this instinct with rational analysis.

John Templeton built one of the greatest fortunes in investing history by systematically buying during what he called "the point of maximum pessimism." He understood that the best bargains appear precisely when most people are too afraid to act.

Benjamin Graham, the father of value investing, taught that the market is like a voting machine in the short run but a weighing machine in the long run. Crashes are moments when the voting machine is driven by fear rather than reason. The weighing machine always catches up eventually. Every crash in history -- the Great Depression, Black Monday 1987, the Dot-com Bust, the 2008 Financial Crisis, and the COVID crash of 2020 -- was followed by a full recovery and new all-time highs.

Here is your concrete action plan:

Your Action Plan

The Bottom Line

Stay the course and trust your process, because the market rewards patience far more than panic.