Selena Maranjian, The Motley Fool
3 min read
For best results when investing, take time to learn a lot about the stock market and about how to invest effectively. Alternatively, you can opt out of that and stick with low-fee, broad-market index funds, such as S&P 500 index funds, which can also build your wealth powerfully.
Either way, here’s one key thing every investor should know about the stock market: It will crash now and then.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a “Double Down” signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same “Total Conviction” signal is flashing for a company 1/100th the size of Nvidia. Continue »
Portfolio values don’t go up in a straight line. The line will be jagged, marked by occasional corrections and occasional crashes. Corrections are drops of at least 10% from recent highs, and drops of 20% or more are considered a crash.
Here are some things to know about market pullbacks:
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They’re not infrequent. According to my colleague Trevor Jennewine, “Since 2010, the S&P 500 and Nasdaq Composite have dropped into correction territory 10 times (once every 18 months) and 14 times (once every 13 months), respectively.”
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Crashes, followed by bear markets, are less frequent. Bear markets happen, on average, about every 3.5 years.
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They don’t necessarily last a long time. The average length of a bear market, since 1928, has been 11.4 months, according to Yardeni Research.
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The stock market has lost about 35%, on average, in bear markets, says The Hartford Funds, while bull markets have averaged gains of 111%.
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Recoveries can be strong. Jennewine writes: “Since 2010, following the S&P 500’s first close in correction territory, the index has returned an average of 18% during the next year and 38% during the next two years.”
What should you do?
Instead of worrying about a market crash, simply prepare for one:
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Don’t keep any money in stocks that you might need within at least five years.
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Consider holding on to a bunch of healthy dividend-paying stocks and value stocks, as they can be more stable than high-flying growth stocks when there’s a market pullback.
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Consider keeping a modest portion of your portfolio in cash, to take advantage of great stocks on sale after a market crash.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again
In 2009, a “Double Down” signal flashed for a little-known chipmaker called Nvidia. If you’d invested $5,000 then, you’d be sitting on $2,706,997 today.*
Now, for the first time in years, that same “Total Conviction” signal is flashing for a company 1/100th the size of Nvidia. It’s a key player in the $1.8 trillion space race, and with the stock recently sitting 20% off its highs, the window to get in early is closing fast.
*Stock Advisor returns as of August 3, 2026
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If I Could Tell Everyone 1 Thing About the Stock Market, It’s This: It Will Crash was originally published by The Motley Fool
