The Crash Buying Playbook That Works When Markets Drop 20% – Lessons From Eight Market Crashes

Markets closed Monday for Martin Luther King Jr. Day – last traded Friday with minimal movement

The quick scan: US markets were closed Monday for the Martin Luther King Jr. Day holiday. Friday's session saw all three major indices drift slightly lower on modest volume as traders headed into the long weekend.

S&P 500: -0.06% (Friday's close at 6,940.01)
Dow Jones: -0.17% (Friday's close at 49,359.33)
NASDAQ: -0.06% (Friday's close at 23,515.39)

What's driving it: Fed leadership speculation and proposed credit card rate caps weighed on sentiment heading into the holiday. Markets reopen Tuesday.

Bottom line: Holiday closures remind us that markets don't require our constant attention. Your portfolio survived a three-day weekend just fine.

How to Actually Execute When Markets Crash 20% – No Charts, No Guesswork

The scoop: There's a gap between knowing what to do and actually doing it when markets crash. You've heard it repeatedly: buy when others are fearful, crashes create wealth, be greedy when others panic. Easy advice to nod along to over coffee. Brutally difficult to execute when your portfolio is bleeding and every headline screams that worse is coming.

Singapore's 1M65 movement recently shared insights from their founder's experience navigating eight major market crashes since 2008 – the financial crisis, Europe's debt troubles, China's 2015 meltdown, the 2018 trade war, COVID's 2020 plunge, and 2022's inflation shock. The lessons aren't about charts or complicated indicators. They're about what actually works when fear is highest and every instinct screams "do nothing."

The most liberating insight? Precision doesn't matter. Successfully catching the exact bottom of a crash is virtually impossible. The goal isn't timing perfection – it's survivability under fear. It's being able to act when paralysis feels safer.

The uncomfortable reality of falling knives

Here's the guarantee: every position you take during a crash, you'll regret initially. The market will drop further after you buy. You'll wish you'd waited. This happens whether you enter at minus 10%, minus 15%, or minus 25%. The regret is baked in.

For sure you'll catch falling knives. For sure you'll lose more money as you buy. Accepting this reality upfront is the first step toward being able to act at all.

Crash buying isn't an intellectual exercise – it's 99% emotional discipline, 1% analysis. Understanding market mechanics means nothing if fear paralyses you at the critical moment. Most investors fail not because they lack knowledge, but because they can't override their survival instincts.

And here's the context that matters: crashes between 20–30% are historically very rare. Most corrections don't reach those depths. Waiting for the "perfect" minus 30% entry usually means missing the opportunity entirely as markets recover before you've convinced yourself it's safe.

Method one: the spread-out mechanical approach

This method offers the lowest error rate and highest repeatability – particularly valuable for investors who don't want to spend retirement glued to market screens.

The framework is elegantly simple: do nothing until markets drop 10%. Then deploy a small position – perhaps 5–10% of available dry powder. Every 2.5% to 5% further decline triggers another purchase. But position sizes increase progressively as the crash deepens.

At minus 10%: small deployment. At minus 15%: slightly larger. At minus 20%: substantially bigger. By minus 25–30% (if it gets there), the heaviest ammunition goes in.

Think of this as dollar-cost averaging on the decline, not the rise. Entry points spread across the descent, which distributes regret rather than concentrating it. You never feel like you mistimed everything because capital wasn't deployed all at once.

The beauty lies in its mechanical nature. No tea leaf reading. No interpretation of whether the crash is "over." Just a predetermined plan that removes emotional decision-making precisely when emotions run highest.

After deploying all designated capital? Walk away completely. Delete broker apps. Focus on literally anything else. The temptation to keep checking positions is overwhelming, but looking changes nothing. It only creates opportunities for panic selling.

Markets might continue dropping after deployment. That's expected. The plan was executed. Continued monitoring serves no purpose except to generate anxiety and second-guessing.

Women tend to execute this method better than men, primarily because they're more willing to walk away after deployment. Men seem constitutionally unable to stop checking positions – a habit that consistently undermines good decisions.

Method two: the signal-based approach

This requires more skill and carries higher error rates, but can yield superior returns when executed successfully.

Instead of mechanical buying at intervals, the approach waits for clear signals suggesting the bottom is forming. This involves studying historical crashes for similar patterns and watching for major policy responses that typically mark turning points.

The 2020 COVID crash provides a clear example. When the Federal Reserve began massive money printing in April 2020, the resemblance to 2007–2008 interventions became obvious. Despite initial shock and hesitation, deploying capital heavily in May 2020 – even slightly late – captured most of the recovery.

Similarly, July 2022's inflation patterns mirrored 1981's situation closely enough to warrant concentrated deployment. Half a million dollars or more going in during a single month when signals aligned clearly, followed by complete disengagement from markets.

But signals are often noisy. Timing windows narrow. Confirmation feels impossible. Hesitation means missing opportunities entirely – like April 2025's liberation day rally that moved too fast for proper analysis. That's fine. Missing opportunities beats losing money on unclear signals.

The hybrid approach most investors should consider

Combining both methods delivers the best of both worlds. The spread-out approach serves as baseline – ensuring participation and removing paralysis. Then reserved dry powder stands ready for signal-based deployment if clear opportunities emerge.

A practical allocation might dedicate 60–70% of crash-buying funds to the mechanical method, keeping 30–40% for opportunistic deployment. This guarantees participation while allowing flexibility to act on obvious signals.

The 2022 inflation crash illustrates this combination: initial smaller deployments following the spread method ($50,000 increments), then concentrated deployment ($500,000 in July alone) when historical patterns became unmistakable.

Individual temperament matters. Those more comfortable with mechanical rules should lean heavily toward method one. Those with experience reading markets and confidence in analysis can shift more weight to signal-based deployment. There's no universal right allocation.

Why preparation trumps execution

This is the crucial insight that separates successful crash buyers from those who freeze: preparation matters infinitely more than execution.

You can understand these methods perfectly, but without a financial safety net in place, without dry powder sitting ready, without months of psychological preparation for the emotional toll – execution fails regardless of knowledge.

The actual buying is easy. The hard part is the months or years beforehand: setting money aside, resisting deployment during smaller dips, building emotional resilience to act when fear peaks.

It's also worth remembering: missing a crash entirely is acceptable. Catching every opportunity isn't required for building wealth. If preparation isn't complete, if circumstances change, if money becomes needed elsewhere – sitting out is the correct decision.

Crashes arrive regularly now. Every year or two, markets hand investors another opportunity. The goal isn't catching all of them. It's staying solvent and prepared for the next one.

Practical considerations for the final working decade

For investors in their 50s and 60s, these are typically peak earning years with potentially declining expenses as children become independent. This window offers the best opportunity to build substantial dry powder and execute one or two well-timed crash-buying campaigns before retirement.

The strategy doesn't require sophistication. No individual stock picking (broad-based indices like S&P 500 only). No chart analysis. No attempts to outsmart professional traders.

Just a plan. Discipline to follow it. And the emotional neutrality that comes from proper preparation – having safety nets in place, understanding the approach well enough that second-guessing doesn't cause paralysis.

Wealth isn't created by catching every crash. It's built by staying patient, preparing thoroughly, and executing with emotional discipline when opportunities arrive.

The next 20% crash will come. When it does, the question won't be whether you knew what to do. It'll be whether you'd done the preparation work that enables actual execution.

Actionable takeaways for L-Plate Retirees:

• Create your mechanical deployment schedule now, before any panic: Map out exact percentages you'll deploy at minus 10%, minus 15%, minus 20%, and so on. Make the plan mechanical enough that fear can't hijack decisions in the moment. Writing it down commits you to action when emotions would otherwise cause paralysis.

• Store dry powder in immediately accessible accounts: Keep crash-buying funds in savings accounts, money market funds, or short-term Treasury bills. Avoid fixed deposits or illiquid investments that might trap capital when opportunities arrive. Quick access matters more than squeezing out marginally higher yields.

• Limit purchases to broad-based indices, never individual stocks: Focus exclusively on S&P 500, NASDAQ, or world index funds during crashes. Don't attempt picking winners amid chaos – buy the entire market. Individual stock selection adds unnecessary risk precisely when concentration is most dangerous.

• Commit to a 30-day blackout period after deployment: Set a calendar reminder and don't check positions before that date. Markets will likely drop further after you buy. Monitoring changes nothing except creating temptation for panic selling. Trust your preparation and give positions time to work.

• Build your financial safety net before thinking about crash buying: This is non-negotiable. Money needed for living expenses, emergencies, or commitments within five years shouldn't be considered for crash buying. Safety nets enable the emotional neutrality required for execution.

• Accept that sitting out beats losing money on incomplete preparation: Missing an opportunity entirely is infinitely better than deploying capital you can't afford to lose or buying without proper psychological readiness. Crashes recur regularly. The next one will come. Losing money you need creates damage that takes years or decades to repair.

Your Turn:
If markets dropped 20% next month, what would actually stop you from executing – lack of dry powder, unclear plan, or emotional unreadiness?
How much of your net worth could you genuinely deploy during a crash without touching money needed for living expenses or emergencies within five years?
Looking at past crashes you've lived through, what prevented you from buying then – and what would you change about your preparation this time?

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

If this breakdown of emotional neutrality helped you understand that successful investing is about systems, not willpower, consider supporting L-PLate Retiree on Ko-fi. Your contribution helps us deliver the psychological insights about investing that most financial advice completely ignores.

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