Ten years ago, Nassim Taleb published a book called Bed of Procrustes: Philosophical and Practical Aphorisms. An aphorism is kind of like a rule of thumb or catch phrase like measure twice, cut once. This post is my stab at a list of rules of thumb that will hopefully help you keep perspective.
The stock market crashes every now and then and this is not your first one.
The details causing the crash are always different, the market manifestations are the same.
Trying to come up with a crash strategy after the crash has happened is a bad idea, you're too late.
There can be no realistic expectation of out-trading a crash or panic.
If you take any action, be prepared to be wrong for a few months, your goal should be to get it right a few years from now.
There will be holdings that you regret holding onto in the short run and holdings you regret selling if you sell anything.
Huge, single day rallies indicate this event is not yet over.
Your time horizon is years, not the next three months.
Even if you think you played the entire crash incorrectly, time will bail you out as long as you don't panic.
While we're at it, don't panic.
If you try to catch a falling knife and buy, be emotionally prepared to appear to be wrong for a while.
Buying after a 20% decline will probably look smart five years from now but may cause regret two months from now.
If you buy some, down 20%, be emotionally prepared to buy more down 30% and more still down 40% and still be prepared to be wrong for a while.
Buying after a large decline can be scary but it isn't as important to do as long as you don't panic and don't deviate from your strategy.
When this is over, any defensive steps you took will either have been as effective as you'd have hoped for, or they won't, what matters most is that you were disciplined when it counted.
But keep up your paycheck contributions to 401k plans if you're still accumulating.
This will not be the last market panic in your lifetime.
The S&P 500 was at 3380 when the Corona Crash started. The next one will start from a much higher level.
I have no idea which direction the next 20% will be but I do know which direction the next 100% will be.
The only truly bad move you can make is panicking.
Last week, my wife and I took a quick trip to Death Valley National Park and then the Mint 400 over the weekend in Las Vegas. A friend asked how I was going to incorporate Death Valley into investing and managing through the crash. I haven't figured that out yet but the scenery is pretty spectacular. The picture in the header of this post is from Dante's View at 5474 feet above sea level looking down at Badwater Basin which is 282 feet below sea level.