Crashes are part of the deal
This is my understanding, for education. Not personal financial advice.
Nvidia has dropped more than 50% twice since 2018. Holders still won. Here's how.
Everyone says they'll buy the dip. Then the dip comes, the headlines scream, the account is down 45%, and they sell. This chapter is about being the person who doesn't.
Crashes are normal
Here are the big S&P 500 declines of the last 25 years (peak to bottom, approximate):
| Period | Cause | S&P 500 drop |
|---|---|---|
| 2000–2002 | Dot-com bust | ~−49% |
| 2007–2009 | Financial crisis | ~−57% |
| 2020 | COVID | ~−34% (in 5 weeks) |
| 2022 | Inflation and rate hikes | ~−25% |
The Nasdaq fell about 78% from 2000 to 2002. Every one of these felt like the end of the world at the time. Every one was eventually recovered, though some took years.
Single stocks swing harder
A concentrated portfolio (Chapter 6) swings more than the index. Even the best companies:
| Stock | Drop | What happened next |
|---|---|---|
| Amazon 1999–2001 | ~−94% | Became one of the largest companies on earth |
| Nvidia 2018 | ~−56% | Crypto-mining demand collapse; later recovered |
| Nvidia 2022 | ~−66% | Rate hikes, not a broken business; AI boom followed |
| Nvidia early 2025 | ~−35–40% | Export fears, AI spending worries; recovered |
These drops often happened while the overall market fell much less. So I don't teach "big drops are rare." I teach: expect a 40–60% drop in a high-growth stock every few years, and plan for it.
Why prices fall even when the business is fine
- Interest rates: higher rates make future profits worth less today. Growth stocks get hit hardest.
- Fear and forced selling: margin calls, funds meeting withdrawals, algorithms selling everything at once. In a crash, most assets move together.
- Expectations: a company can beat its numbers and still fall if people expected more.
The key question in a drop is always: did the business break, or just the price? Reread your thesis from Chapter 6.
Dollar-cost averaging
DCA means investing a fixed amount on a fixed schedule, say $500 on the 1st of every month, no matter what.
| Month | Price | $500 buys |
|---|---|---|
| Jan | $100 | 5 shares |
| Feb | $50 | 10 shares |
| Mar | $80 | 6.25 shares |
You spent $1,500 and own 21.25 shares, an average cost of about $70.60, even though the average price was $76.67. Drops automatically buy you more. You don't need to call the bottom, and you can't anyway.
Long-term holding
Missing just a few of the best days wrecks returns, and the best days usually come right after the worst ones, in the middle of the panic. Investors who sell to "wait it out" often miss them. Remember the behavior gap from Chapter 4: the average investor trails their own funds because of exactly this.
Your crash plan (write it now)
- Emergency fund so you never sell to pay bills.
- No leverage.
- Automatic monthly buys.
- Thesis notes for every stock. In a drop, check the business, not the price.
- A "do not touch" rule for money with a 10+ year horizon.
- Optional dry powder: a small cash pile you deploy only after a 30%+ drop.
If you've done this before the crash, a 40% drop becomes what it should be: the best sale of the decade.
Plan for the crash before it happens. Then it's a sale, not a disaster.
Sources
- S&P 500 drawdown history (S&P Dow Jones Indices / Yardeni): https://yardeni.com/charts/stock-market-corrections/
- Nvidia price history: https://finance.yahoo.com/quote/NVDA/history/
- Investor.gov on dollar-cost averaging: https://www.investor.gov/introduction-investing/investing-basics/glossary/dollar-cost-averaging
- Morningstar Mind the Gap 2026: https://www.morningstar.com/content/cs-assets/v3/assets/blt9415ea4cc4157833/blt852a4301adc2f5db/US_Mind_the_Gap_2026.pdf
Next: Lesson 08, What's next (AI, robotics and productivity) →
