Lessons From 2 Market Crashes

Dear investor,

Indexes are at all-time highs, and so is overconfidence. Most people giving you advice have been investing for less than 10 years, they only know one of the longest bull markets in history.

Market-cap indexes have also distorted how people think about stock returns.

I lived through the Dotcom bubble and the financial crisis with my own money on the line. Here’s what actually happens when markets crash, how people really react, and how to prepare yourself. This isn’t cookie-cutter advice like “be fearful when others are greedy.” This is what I learned with skin in the game.

Knowing how to put out a fire is different from doing it when flames are in your face.

What Actually Happens During Crashes

Nobody “buys the dip.” It sounds good in theory, but emotions take over. You watch your gains evaporate week after week. Your portfolio drops 10%, then another 10%. The only thought in your head: should I get out while I can?

Nobody knows when it’s over. During months of decline, you’ll see occasional rallies. A 10% bounce feels like relief, so people buy in, only to watch it disappear the next week. Imagine buying what you thought was the bottom, then watching your money vanish again. People don’t stay cool through that.

Reading the news makes it worse. Media companies turn your emotions into profit. You won’t find useful advice from market pundits during rough times. Just noise.

Good news gets ignored. When fundamentals start improving, people miss it. Financial media still promotes fear. The shock sits deep. People don’t flip a switch when facts change.

New crises pile on. Just as markets start recovering, another doom scenario hits. After 1999 came 9/11. After 2008 came the Greek debt crisis. Your portfolio gets cut in half, starts recovering, then drops another 20%. That’s when people give up on investing entirely.

How to Navigate This

I’ve tested this approach with real money through two crashes. It works when theory fails.

Prepare mentally. Run through the scenario in your head now. Picture your portfolio losing value rapidly. If you’ve mentally rehearsed it, you’ll handle it better when it happens.

Buy quality at reasonable prices. Look for companies that generate free cash flow year after year. They sell products with real demand, products other industries rely on, products mandated by law, products that are hard to replace. These companies get hit during panic selling too, but they’re the least affected. When you don’t overpay, you add another layer of protection.

Diversify across countries and industries. What matters is whether a company increases shareholder value. This happens everywhere, a German industrial glue producer can be as good an investment as a U.S. tech stock. Focus on the value you’re getting per share.

Don’t try to time the market or short anything. Your odds are terrible. Only play games where the odds favor you.

Keep investing as if nothing happened. This sounds strange, but it’s the best approach. Every weekend, look for stocks and read earnings transcripts. They’ll tell you how much the crisis actually affects each company. Then do it again next weekend.

That’s it.

After the worst passes, you’ll see that your carefully chosen stocks are still operating. Your portfolio will recover faster than the market because others will remember that fundamentals and quality matter. Those stocks bounce back harder than the rest, until people forget their lesson in a few years and the cycle repeats.

Finding Quality in Overlooked Places

Speaking of quality companies that hold up during chaos, insurance is one of the most overlooked sectors out there. It checks every box I mentioned: a product people and businesses need no matter what’s happening in the economy, and demand that’s often mandated by law.

When markets crash, insurance companies keep collecting premiums. They don’t disappear. They don’t get disrupted overnight.

The sector gets ignored because it’s not exciting. No one brags about their insurance stock at parties. But that’s exactly why it offers value.

I’ve put together a detailed research report on one of the best-managed insurance companies I’ve found. Strong balance sheet, disciplined underwriting, management that actually cares about returns. The kind of business you want to own when others are panicking.

👉 Download the full report 👈

Until the next issue.

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Disclaimer: This analysis is not advice to buy or sell this or any stock; it is just pointing out an objective observation of unique patterns that developed from my research. Nothing herein should be construed as an offer to buy or sell securities or to give individual investment advice.

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