The first time the market really tests you, you will want to do something.
Late March 2020. The S&P 500 had fallen roughly a third in five weeks. The FTSE was down about the same. Every headline was apocalyptic, every forecast worse than the last, and nobody knew how bad it would get. If you had an ISA or a SIPP, it looked like a crime scene.
The temptation to sell was enormous. Millions of people did.
They were wrong. Not because the worry was unfounded — it wasn’t — but because selling is the easy half of the trade. Once you’re out, you have to decide when to get back in. Most people never find a good answer to that question.
The number that should terrify you
Here’s what selling in a crash tends to cost.
J.P. Morgan looked at the S&P 500 over the twenty years from 2004 to 2024. Put $10,000 in at the start and leave it alone: you end up with about $70,000 — an annualised return of 10.5%.
Miss just the ten best trading days — out of roughly five thousand trading days in the period — and the return drops to 6.2%. Your $10,000 becomes about $35,000 instead of $70,000. Miss the twenty best days and you’re down to 3.6%.
Half your wealth. Gone. Not because you were unlucky — because you sat in cash for two weeks at exactly the wrong time.
Here is the sting. Those best days are almost always right next door to the worst days. In one eight-day window in March 2020, the S&P 500 had three of its thirty best trading days and five of its thirty worst trading days of the last thirty years. The pain and the rebound happen within days of each other.
You cannot miss the bottom without also missing the bounce.
Why we sell anyway
Knowing this doesn’t help as much as you’d hope, because we aren’t wired to sit still.
Daniel Kahneman won a Nobel Prize partly for showing that losses hurt about twice as much as equivalent gains feel good. A 30% drop doesn’t register as a 30% drop. It registers as excruciating.
On top of that there’s action bias: when something goes wrong, doing anything feels better than doing nothing. Football goalkeepers dive left or right on penalties because standing still looks ridiculous, even though standing still would save more penalties. Investors sell in a crash for the same reason. Doing something feels like taking control. It usually isn’t.
The news cycle doesn’t help. Headlines in a bear market are not designed to calm you down. They are designed to keep you watching.
What doing nothing actually looks like
Let me be specific, because “do nothing” is a lazy phrase.
Doing nothing is not the same as never putting any more money in. When I have spare cash, it goes into my ISA or SIPP. When prices are low, that money buys more units. That’s a feature, not a problem.
Doing nothing is not the same as never looking at your portfolio. It means looking at it rarely enough that you don’t feel obliged to act on every wobble.
Doing nothing does not mean ignoring everything. It means ignoring the specific noise — daily headlines, doom-laden forecasts, the bloke at the pub who’s just discovered gold — that tempts you to abandon a strategy that works.
Take the last few weeks. The US–Iran war sent the market down about 9% in March. I didn’t sell a thing. Nothing fundamental had changed in the underlying economy — this was geopolitics, not earnings. The S&P 500 closed at a new all-time high last week. If I’d sold, I’d have missed the recovery.
The 2022 Ukraine war was the same story. The market dropped, and went on to set successive new highs. The war is still going on.
Wars happen. Markets recover.
The real tests
In 2007–09 the S&P 500 fell more than 50% peak to trough. It took until 2013 to get back to its previous high. The people who sold at the bottom locked in a historic loss. The people who held, and kept buying, ended up owning much more of the market at the bottom — and watched it triple over the decade that followed.
In 2020 the S&P fell more than 30% in five weeks, the fastest crash on record. It took about twenty weeks from the bottom to a new all-time high.
There will be another one. I don’t know when, and neither does anyone else. What I do know is that when it comes, it will feel like every other crisis has felt: unique, unprecedented, and uniquely terrifying.
It won’t be. And your strategy, if you have one, will be to not sell.
The market rewards patience. It does not reward cleverness, or nerve, or insight. It rewards the people who sat there when everyone else was moving.
Not occasionally. Consistently.
Past performance is not a guarantee of future results. I am not a financial adviser and nothing here is personal advice — do your own research before you act on any of it.