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Investment
Everything useful happens before the crash. A checklist for each phase, and the one decision that must be made in advance.
By FreeCalculators Editorial · Published 2026-09-01 · Updated 2026-09-04 · 4 min read · 962 words
Almost everything useful you can do about a market crash happens before it starts. Once prices are falling, your options narrow to holding, selling, or buying, and the quality of that choice depends entirely on decisions already made: your allocation, how much cash covers near-term spending, and whether you wrote down what you would do. Preparation is the strategy; the crash is just the test.
First, size your equity weighting to a drawdown you could hold, expressed in dollars rather than percentages. Second, hold one to three years of spending outside volatile assets, so nothing forces a sale. Third, secure your income: an emergency fund matters more than portfolio positioning, because job loss and a market fall often arrive together.
Fourth, write down what you will do at specific levels. Not a forecast, a rule: at a 20% fall I rebalance, at 35% I continue contributing and do nothing else, at 50% I still do not sell. The document's value is that the decision was made calmly by you rather than reactively at the trough.
| Phase | Do this | Avoid this |
|---|---|---|
| Before | Set allocation, build cash buffer, write the rule | Predicting timing, or waiting for a signal |
| Before | Secure income and emergency fund | Investing money you may need within 3 years |
| During | Keep contributing, rebalance to target | Selling, or stopping contributions |
| During | Spend from the cash bucket | Reading the news hourly |
| During | Harvest losses in taxable accounts | Buying protection after paying for the risk |
| After | Rebuild the cash buffer | Chasing the assets that just recovered most |
| After | Reassess tolerance honestly | Reducing risk at the bottom instead of later |
The useful actions in a decline are boring. Keep automated contributions running, because they buy more units at lower prices and continuing requires no decision if you never stopped. Rebalance to your target, which mechanically sells what held up and buys what fell. Spend from the cash bucket rather than selling equities.
In taxable accounts, harvest losses to offset realised gains, keeping the wash-sale rule in mind: repurchasing a substantially identical security within 30 days disallows the loss, so the replacement must be genuinely different. That is the complete list of productive activity.
Two investors, same crash, different preparation (2026)
Both hold $600,000 and spend $40,000 a year Investor A: no cash buffer, 90% equity Market falls 45% Portfolio at trough $348,000 Must sell $40,000 of equity at the low Units sold are 82% more than at the peak Balance after 5 years $421,000 Investor B: 3-year buffer, 70% equity Cash held outside markets $120,000 Equity portion falls 45% to $264,000 Portfolio at trough $384,000 Spends from cash; sells no equity for 3 years Balance after 5 years $548,000 Difference $127,000 B held less equity and finished ahead, because A was forced to sell into the decline.
Rebuild the cash buffer you spent, because the next decline will arrive without notice and the buffer is what made this one survivable. Then reassess your tolerance honestly against what you actually felt and did, rather than what you had predicted about yourself.
Avoid the common post-crash error of buying whatever recovered fastest. That is performance chasing with better narrative cover, and it usually means increasing concentration precisely when valuations have already moved. Return to your written allocation instead.
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This guide was written and reviewed by FreeCalculators Editorial, drawing on published formulas, official government sources, and real calculator outputs from our 4 calculators in this category. Every claim is sourced; every formula is auditable. Read our review policy.