Crash Buying Strategy: How to Buy Stocks During Market Crashes and Build Wealth

AI stocks lift markets as holiday week trading begins with optimism

The quick scan: Markets kicked off the shortened Christmas week with solid gains as artificial intelligence stocks rebounded, helping the S&P 500 post its third consecutive winning day. The rally comes as investors weigh Wall Street's bullish 2026 forecasts against lingering concerns about elevated tech valuations heading into year-end.

S&P 500: +0.64% to 6,878.49 – extended its winning streak to three days, supported by renewed enthusiasm for AI names and continuing its impressive 2025 run of approximately 17% gains for the year
Dow Jones: +0.47% (+227.79 points) to 48,362.68 – blue-chip stocks joined the advance as all sectors participated in Monday's broad-based rally
NASDAQ: +0.52% to 23,428.83 – tech-heavy index climbed as key AI players like Nvidia gained more than 1% on news it may begin H200 chip shipments to China by mid-February, while Micron Technology and Oracle added around 4% and 3% respectively

What's driving it: The AI trade regained momentum after a mixed previous week, with investors refocusing on the sector's long-term potential rather than short-term valuation concerns. Wall Street strategists remain confident the bull market can continue into 2026, with the average forecast predicting the S&P 500 could reach 7,629 – representing 11.6% upside. Historical patterns also favour this week, as the period including Christmas has been positive for the S&P 500 in about two out of every three years since 1945.

Bottom line: As 2025 winds down with markets up roughly 17% for the year, the Monday bounce reminds us that AI enthusiasm remains alive despite recent rotation jitters. For L-Plate Retirees watching this late-year strength, the real question isn't whether to chase rallies – it's whether we're building the dry powder for when this three-year bull market eventually takes a breather.

When Fear Strikes, the Prepared Get Rich

The scoop: There's a moment every investor faces when the market decides to throw a tantrum. Headlines scream. Portfolio values bleed red. Friends at coffee start sentences with "Should we be worried about…?" and you feel that familiar tightness in your chest.

This is when most people freeze. Or worse, sell.

But there's another way – one that doesn't require superhuman courage or a crystal ball that predicts bottoms. It requires something simpler and more powerful: preparation.

A Singaporean financial educator has developed what he calls "crash buying kungfu" – a disciplined approach to buying when markets panic. The insight is beautifully simple: crash buying is 90% about managing emotions, and emotions are easiest to manage when you've already made your decisions.

Think of it like holding a heavy hammer. At first, it's manageable. But hold it for hours, days, weeks – accumulating more dry powder, watching it get heavier – and eventually your arm aches so badly you can't wait to slam that hammer down. When the crash finally comes, you're not paralysed by fear. You're relieved to finally act.

The three enemies of crash buying

Most investors fail during crashes for three predictable reasons.

First, they have no dry powder ready – they're already fully invested, watching from the sidelines.

Second, even those with cash available chicken out when the moment arrives.

And third, there's "bottom obsession" – the desperate need to catch the exact lowest point, which usually means missing the opportunity entirely.

The irony? Crashes are becoming more frequent. Since 2018, we've seen four significant drops roughly every two years. What used to be once-in-a-decade opportunities are now biennial sales events.

Preparation beats prediction every time

We don't predict crashes. We prepare for them. And preparation happens in three phases – before, during, and after. Today, we're focusing on the before, because that's where 90% of your success gets decided.

Step one is establishing your financial safety net – the psychological foundation that lets you act when others freeze. Build a retirement nest egg so robust that even if your entire stock portfolio evaporated tomorrow, you'd still be fine. This isn't pessimism. It's permission. Once you know you're genuinely safe, you can be genuinely bold.

Step two is accumulating dry powder – and this is where many get it wrong. Dry powder isn't created by selling existing positions to wait for a crash. That's timing the market, which is usually disastrous. Instead, dry powder comes from your cash savings, fired in order of lowest interest first.

Start with accounts earning the least – often retirement accounts sitting idle at 1-2%. Then move to ordinary savings earning modest returns. Finally tap cash reserves, which are typically in fixed deposits or high-yield accounts. By the time you're reaching for that third bucket, the first two have already been deployed – a natural pacing mechanism that prevents you from going all-in too soon.

Step three is the tranching strategy. Break your dry powder into five or ten shots. Fire one. Wait for emotional equilibrium. Fire another. Wait again. This isn't about catching the bottom; it's about giving yourself permission to act imperfectly while the world panics.

Rebalancing as stealth crash buying

There's another approach: systematic rebalancing. Maintain a target ratio between stocks and bonds (say, 60/40 or 50/50). When equities drop, your ratio shifts – maybe to 40/60. Rebalancing back to 50/50 means selling bonds and buying crashed stocks without making any emotional decision at all. The market does the deciding for you. You just follow your predetermined rule.

The real kungfu

What makes this approach powerful isn't the mechanics – though they're sound. It's the emotional architecture it creates. By preparing extensively beforehand, you transform crash buying from a high-stakes gamble into simple execution.

When others are paralysed by "Should I?" you're calmly thinking "Which bucket next?"

When others are googling "Is this the bottom?" you're already three tranches in, knowing the bottom doesn't matter.

Following this approach in two major crashes generated roughly 80-90% returns. Not through genius or perfect timing. Just through having a heavy hammer ready and the discipline to swing it when everyone else had dropped theirs.

Market crashes aren't rare anymore. They're biennial features of modern investing. The question isn't whether you'll face another one. It's whether you'll be ready.

Actionable takeaways for L-Plate Retirees:

• Build an unshakeable safety net first. Ensure your retirement foundation is so solid that total portfolio loss wouldn't devastate you. Max out retirement accounts or create guaranteed income streams. Safety nets give you permission to be bold.

• Accumulate dry powder in three sequential buckets. Never sell existing positions to create crash-buying cash. Instead, build three buckets: retirement savings (earning minimal interest), ordinary savings (moderate returns), and cash reserves. Deploy them in that order during crashes.

• Practice the heavy hammer principle. As dry powder accumulates, it becomes psychologically "heavy" to hold. This discomfort is your ally – when crashes arrive, you'll want to deploy because you've been waiting uncomfortably for months, not because you're making a fear-based decision.

• Deploy in tranches, never all at once. Break dry powder into 5-10 equal portions. Fire one shot, regain emotional equilibrium, then fire the next. This removes bottom-timing paralysis and gives multiple entry points. Imperfect action beats perfect paralysis.

• Use systematic rebalancing as autopilot crash buying. Set a target stock/bond ratio (like 60/40) and rebalance when it shifts significantly. This forces you to buy crashed stocks mechanically without requiring courage or market timing – the math does the deciding.

• Prepare now for unpredictable crashes. Accept that crashes occur every 2-3 years in modern markets. Stop asking "When?" and start asking "Am I ready?" The answer requires safety nets established, dry powder accumulated, and deployment plans predetermined – all before emotions cloud judgment.

Your Turn:
What's stopping you from building your first bucket of dry powder – is it the mechanics, the discipline, or something else entirely?
If you had a 20% market drop tomorrow, how would you honestly feel – prepared and eager, or anxious and paralysed?
Looking back at previous market crashes, what did you do – and knowing what you know now, what would you do differently?

👉 Hit reply and share your thoughts – your answers could inspire fellow readers in future issues.

If this framework for turning market chaos into opportunity resonates with you, consider supporting us on Ko-fi. Your contribution helps us keep sharing the kind of unglamorous, practical wisdom that makes real difference when markets misbehave. No fluff, no hype – just the tools to stay calm and act smart when everyone else is losing their heads.

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