How To Invest During the Next Stock Market Crash

Added: 2026-05-12

[00:00:00]At some point, the stock market is going to crash. It might be caused by the bursting of the AI bubble wiping trillions of dollars of value from some of the world's largest companies, or it maybe it starts because the Iran war escalates further sending oil prices to their highest point in years.

[00:00:15]Add in the fact that many countries are facing a cost of living crisis with rising prices, stagnant wages, and slow growth, and you have yourself a melting pot ready to pop at any moment. Now, I'm fully invested in the stock market, and I've got hundreds of thousands of pounds at stake across all of my different investing accounts. If a crash was to happen, let me share with you exactly what I would do, how I'd invest, and what I'd be thinking. But first, let's talk about stock market crashes. As I'm making this video, there's plenty going on in the world that has people calling for the next stock market crash. Just like I mentioned, we've got many people calling for the AI bubble to burst.

[00:00:51]Companies are spending hundreds of billions of pounds to build new data centers and buy chips from the likes of Nvidia and AMD in the battle to win the AI arms race. These huge expenditures of real cash today have a lot of people worried about whether they will see profits anytime soon. Recently, Mark Zuckerberg announced that Meta is investing up to 145 billion dollars on AI projects in the coming year, but there's no sign yet if this will actually make them any more money. Their shares have fallen this year by around 8% this year, and they're one of the worst performing stocks in the Magnificent Seven. On top of everything around AI, we've obviously still got the war in Iran going on pushing oil prices into multi-year highs. Oil reserves around the world are approaching their lowest level in years, and there's no sign at the moment that this conflict comes to any simple resolution. One day it's over, and the next day the Strait of Hormuz is closed again. These higher prices for oil are hitting some of the poorest people in the world and are causing inflation to remain higher for longer during a cost of living crisis faced by many people. However, with all of that said, let's just put that to one side for a second and step back. A A market crash is something that almost every investor fears, whether you've been doing this for years or not even started yet. There seems to always be a voice from some corner of the room that any moment now a crash must be coming.

[00:02:07]Now, a stock market crash is generally defined as a decline in the market of more than 20%. Anything less than that, say around 10% or so, is typically called a pullback or a correction.

[00:02:17]Crashes are the most serious stock market event and throughout history they've happened quite a few times. In fact, if you look back at the market over the past 100 years or so, we see seven major stock market crashes. But if we add in other declines of more than 20% we get to more than 13 different events. This is everything from the Great Depression of the 1930s that saw declines of almost 90% to the more recent global financial crisis where stocks fell more than 57% On average you're looking at cutting stock prices by 35.8% from peak to trough and typically they last about a year and a half. The recovery afterwards takes approximately 2 years and 2 months on average. Now, all of that sounds pretty scary to me and it's not really surprising that this is how most people feel as well. Nobody wants to invest their hard-earned money and then just see it all disappear in your investing account. It's at this point where most people end up going wrong and it's not really surprising when you consider the way that we all think. Picture this, everyone around us says the market's going to crash. They point to all of the data, all of these charts and they say that a market crash is due anytime now.

[00:03:21]So, you better be ready for it because it's going to be really, really bad. Our normal human response to a situation like this is to go into protection mode and make sure that this crash won't affect us. So, following a typical reaction, if a market crash does start to happen and we see a few red days or weeks, we might start to worry and think that we better get out of our investments as soon as possible. We may as well save what we already have, take the profits if we have any, and hold onto our cash. We might even think about buying things like gold or bonds with the idea that we'll just wait this out and then buy back in once the crash is over. All of that sounds perfectly normal and it's a rational way to think about things. Stock crashes are bad, so let's just avoid them and only invest when times are good. Oh, how I wish investing was just that easy. But unfortunately, this is not how the market works. If it was as simple as that, we'd all be millionaires in a very short space of time. You see, in order for that plan to work, you'd have to have some kind of amazing crystal ball and get your timing perfectly right multiple times. Firstly, you'd have to know a crash was about to come and sell out just before all of this happened.

[00:04:25]Then you'd need to know how long the crash was going to last for. Is it going to be one that lasts for a couple of years or will it be the kind that bounces back in just a month? After that, you'd have to be certain that the crash was over so that you could buy back in. And in order to do that, you'd have to time your new purchase right at the bottom, which is typically when fear from everyone else is right at its highest point. Then after that, you'd have to know that the market was going to go up so you could sit there with all of your profits and ride the wave. Let's get this part out of the way now. There has been nobody in history who has ever done this on any kind of consistent basis. Sure, there are plenty of times when someone has timed an investment which appears to have been perfect. And there've been people who have successfully called a market crash and even made a lot of money betting on it happening. I'm sure you're all aware of people like Michael Burry made famous from the film The Big Short where he predicted the global financial crisis.

[00:05:15]Well, that might have worked out well one time and got him a lot of attention, but for every right call, there are literally thousands of wrong ones that get made. He's made plenty. Anyway, here's another example that doesn't get covered much. There's a professional fund manager called John Hussman who set up his own investing fund after a career as an academic. He's as smart as they come. He's got a PhD in economics from Stanford University in the US and he was professor of economics and international finance at the University of Michigan.

[00:05:41]Now, John correctly predicted a couple of events. Just like Michael Burry, he predicted the global financial crash.

[00:05:47]But on top of that, he also saw the dot-com bubble coming as well. After nailing these events, he obviously got a lot of attention and grew his investment fund to billions of dollars. People assumed that as he predicted something happening, he must therefore know the future, and the money came flooding in.

[00:06:03]This was obviously a terrible time for investors overall. Two major crashes not too far away from each other, and many people would have been underwater buying pretty much anything. It's no surprise that people were looking for alternatives and to professionals who claimed they could make them money. By 2010, John had amassed almost $7 billion for investors, and during the global financial crisis, he performed well.

[00:06:23]Although still losing money during this time, his fund was nowhere near as low as the other managers, as his fund was set up to bet against the market. Now, what comes next for John should be a lesson for all of us that will lead us nicely to getting a proper answer about how we can invest during a stock market crash.

[00:06:39]As many of you know, after the global financial crisis, the stock market had pretty much an uninterrupted bull market all the way until the pandemic. The S&P 500 went up with an average compounded return of more than 12% a year. So, anyone who bet against the market during this time was not going to have a very nice time. With all of his expertise and qualifications, did John foresee that the crash was over and the bull market was about to begin?

[00:07:03]No. In fact, he doubled down and kept betting against the market, insisting that everything was overpriced and the market was completely irrational. Over the last 10 years, his fund, which now has a few hundred million inside of it, has returned a negative 2.7% a year. So, his investors have not only lost money, but have been paying extremely high fees to be part of his supposed incredible market insights. And to this day, he is still convinced that a crash is happening. Hopefully, you see the point I wanted to make here. There is nobody that can predict when a stock market crash can happen, but there are and will always be people who call for a crash every single day or every single year.

[00:07:40]Just because they get their timing right once, doesn't excuse them every single time they were wrong. You cannot predict the future moves the stock market regardless of how intelligent you are or what qualifications you have. So, where does that leave us then? Well, first off, let me just reiterate this point again that nobody can predict the market. Absolutely nobody knows what will happen in the future and that's part of investing. And in fact, that's why investors even receive returns in the first place. We are putting our money into shares and other assets with the hope that they will rise in value over the long term with absolutely no guarantees whatsoever. The alternatives like saving money which have a lot more certainty give us a lot lower returns.

[00:08:18]Basically, with no risk comes no reward.

[00:08:21]When we invest, we need to expect that the prices of our investments are going to change every single day and they can be affected by a whole number of things happening all around the world. In the worst case scenario, the stock market can have a terrible crash and the value of our investments can go down a lot or sometimes just go nowhere for months and even years. That's just part of investing, I'm afraid. And if you take on too much risk like buying shares in a company that your mate told you to buy, you can even lose everything. Now, I don't want to get too negative about things because there are plenty of reasons why investing is an amazing thing to do and I think most people should learn lots more about it. I've been sharing all of my knowledge on YouTube for almost 5 years now and as many of you will know, I share exactly what I invest in and how I invest every single month. I even started a brand new stocks and shares ISA this month even with everything going on in the world which to a lot of you watching will sound like a crazy thing to do. But, you know what? This is a perfect example of putting my own money exactly where my mouth is.

[00:09:14]I think it's worth remembering that there will always be a reason to not start investing or to stop investing.

[00:09:20]There's always going to be something going on in the world or some voice in the corner calling for the worst thing to happen. As a human, you're naturally going to want to protect what you have and pay a lot more attention to those kinds of people rather than moving forward with a cool head. Personally, I think the real damage from a stock market crash is not necessarily from the crash itself, it's from how we react to the event. Just think about this for a moment. If you were able to go back to 1950 and get a thousand pounds into the S&P 500, or at least whatever the equivalent was, by today you would have 15.5 million pounds. Now, that's without inflation taken into account, but even if you did do that, you'd end up with purchasing power of around 800,000 to a million pounds. Anyway, with that all said, how do you make sure to get through a stock market crash and come out the other end not just surviving, but thriving. For me, this comes down to a few key principles, and these are the steps I would take. Firstly, here's step one. When I invest now, I'm doing it with a plan. I didn't necessarily have this when I first started, as I really had no idea what I was doing. But as the years went on, I now kind of have what I want to achieve. For me, it's all about financial freedom, so I want to invest my money as efficiently as possible to get to a point where I can be completely financially free, meaning that I can do whatever I want, whenever I want. For you, this could be a goal of retiring earlier, it could be saving for a house one day, or any number of things. Either way, you need to have some kind of plan, otherwise you're just doing something for no reason at all. And when you do something without a plan, you can easily get knocked off course when difficult times can come. Now, in that plan, I'm sure you said to yourself that you were going to be a long-term investor and keep investing no matter what. Well, if a crash does happen, you need to go back to that plan and stick with it, otherwise it's not going to be much of a plan at all.

[00:11:00]If it helps, run the scenario in your head. Ask yourself how you would feel if your investments work out by 30 or even 40% over the space of a few weeks or months. It's never going to feel great, but you have to truly ask yourself if you can get through this, and then this will lead you on nicely to point two.

[00:11:15]Secondly, invest like you mean it. When I say this, I mean getting yourself in the best possible position before you invest. You've got to have all the basics covered and have a strong foundation, otherwise, just like we're building a house, you'll create something that can easily get knocked down. For me, that means things like only investing money that you can afford to keep away for a long time. It means making sure that any high interest debts are paid off, and it also means making sure you have enough cash or at least access to cash in the event of something going wrong in your life. Everything has to be aligned with making sure you don't need to sell your investments if the worst was to happen. Because you cannot lose money as an investor if you do not sell. Only those people who sell at the bottom of the market end up losing money. Those people who hold on and stick to the plan get to reap the possible rewards.

[00:12:00]This point also includes making sure you invest in a way that matches your own level of risk and being well diversified as well. Like I mentioned before, if you only choose a handful of company stocks and they end up working out badly, there's very little you can do if the worst were to happen. Try to find something that works for you and this is something only you can decide. So, take your time before making any decisions like this. For me, again, just speaking personally, I like to invest using low-cost index funds for the majority of my investing and most of this is done globally. So, basically, all my money gets spread amongst all the world's biggest companies and I don't really have to worry about whether certain companies do well or not. I just focus on getting more money in every month, no matter what, and making sure that I use the best kind of accounts. If you ever need any help on those points, I've got plenty of other videos on my channel to help. Then finally, point three is pretty much do nothing and go back to point one. I find it a strange thing to want to change the way you invest based on things that are outside of your control. If you change the way you invested because of every single thing that happens in the world, you'd end up with a new strategy every week. You'd be saying, "Right, I need to buy oil this week and add in some copper because everyone said this is going up and then sell my stocks as they reckon a crash is coming." This is total and utter madness and you've got to remind yourself just how poorly the average person does when it comes to their own investments from thinking exactly like this. It would be like quitting your job and choosing a new career because you had a bad day at work. Stop trying to time the market, ignore the noise, and focus on what you can control and what you can actually do. I can bet you can come back to this video in a year's time and we'll be talking about something completely different, yet there will always be a reason to not invest or to stop investing. That's just human nature, I'm afraid, so take it all in and then go back to step one. I hope you've enjoyed this video. If you are interested in seeing me start a brand new investing portfolio in my Stocks and Shares ISA, you might like this video next as I'm going to invest every single month no matter what happens. I'll see you over there and as always, happy investing.