A 30% drop in the stock market – a wealth of common sense

A reader asks:

My question is about the potential problems ahead. Let’s say the market drops 20% or even 30%. Would I be happy? No. But because I’ve been investing (mainly DCA) for over a dozen years, I consider this kind of decline a “time travel” two or three years back. Wouldn’t this be a good thing?

Has there ever been a bad time travel movie?

I say no.

Biff Tannen would probably have become a lot richer in Back to the Future II if he had taken a stock market almanac instead of the Sports Almanac.

Oh well. He didn’t look like a stock guy.

I like to relate the concept of time travel to the stock market.

Let’s look at the graph:

If the US stock market were to fall 30% from current levels, this would take us back to January 2024 levels.

Things weren’t that bad in January 2024, right? I bet you’d love to go back and buy more shares than what we know now.

The problem is that a 30% crash makes it feel like a 40% recession is the next stop. A 40% beating would take the market back to May 2023.

Once stocks fall 40%, a 50% crash seems inevitable. That would wipe out almost all of this decade’s gains and return the stock market to September 2020 levels.

Losses of 30 to 50% wouldn’t feel great. For that to happen, something would have to go very wrong.

Maintaining dollar-cost averaging in stocks during a crash would be painful in the short term, but would likely make you very happy in the long term.

Of course, the stock market doesn’t crash in a vacuum. It usually happens due to a financial crisis or recession that increases the unemployment rate.

I remember a conversation with friends during the Great Financial Crisis. It was 2008 and we had no idea how long the crisis would last.

A friend pointed out that those of us who kept our jobs would do well.¹ We could continue to funnel money into our 401ks at lower and lower prices. As long as we were patient, everything would be fine. But those who lost their jobs or homes would be left behind for years.

There’s an old saying that when your neighbor loses his job, there’s a recession. Depression when you lose yours.

And my friend was right.

After the 2008 crisis, the labor market was sluggish for years. But anyone who kept their job, kept paying their mortgage, and kept making 401k contributions like bandits.

It only lasted a few years.

Investing during a market crash depends on your gut strength, but also on your circumstances.

Time traveling 30-40% into the past wouldn’t be the worst thing in the world for net savers with a long time horizon… as long as you don’t experience personal depression from it.

We addressed this question in the latest Ask the Compound of 2025:



Other questions we discussed were about buying bitcoin directly versus the ETF (with help from Eric Balchunas), crypto vs. tech stocks, gas prices vs. recessions, and how to turn your investments into an investment plan.

¹This was a few years after we had graduated and had all just gotten married. None of us had a family yet and we had just started buying our first homes.