Why market crashes are wealth transfer events—and how to be on the right side

📅 October 10, 2025⏱️ 4 min read

March 2020. The S&P 500 drops 34% in 23 days. Your $100,000 portfolio is suddenly worth $66,000. Your coworker sells everything. You’re thinking about it. The news is apocalyptic. Everyone’s panicking.

Fast forward to today. The market is up 140% from that bottom. Your coworker’s $66,000 is still $66,000 (plus inflation losses). If you held? You’re sitting on $158,000. If you bought more? You’re somewhere north of $200,000.

The Scenario Everyone Recognizes

It’s happening right now to someone reading this. Maybe not a 34% crash, but a 10% correction. A bad earnings report. A geopolitical crisis. A recession headline. And the same primal fear is firing in your brain: “What if this time is different? What if it doesn’t recover?”

Here’s what your fear is costing you:

10.2%S&P 500 avg annual return (1950-2024)

3.7%Average investor actual return

6.5%The “behavior gap”—emotional decisions

That 6.5% gap? That’s the cost of selling when scared and buying when comfortable. Over 30 years on a $500/month investment, that’s the difference between $600,000 and $1,400,000. Your emotions just cost you $800,000.

What The Data Actually Shows

Historical Market Truth:

Since 1950, the S&P 500 has experienced 38 corrections of 10% or more. Average time to recover? 4 months. Every single one—100% of them—eventually recovered and went on to new highs. The only people who lost money permanently were the ones who sold at the bottom.

Let’s look at what happened after the scariest moments in modern market history:

• 2008 Financial Crisis: Market down 57%. If you invested $10,000 at the bottom, it’s worth $61,000 today. If you sold at the bottom and waited for “stability,” you missed the entire recovery.
• 2020 COVID Crash: Market down 34% in 23 days—the fastest crash in history. Recovery time? 5 months. Those who sold at the bottom needed perfect timing to buy back in. Spoiler: Nobody has perfect timing.
• 2022 Bear Market: Down 25%, lasted 282 days. Headlines screamed recession. Smart investors bought the fear. The market is now 35% above that low.

The pattern is crystal clear: temporary panic creates permanent wealth for those who stay disciplined.

The Wisdom To Internalize

Volatility isn’t a bug in the market—it’s the feature that creates wealth. The premium you earn for long-term investing is literally the price of enduring short-term discomfort.

Think of market drops like this: You’re getting a 10-30% discount on your retirement. Every share you buy during a crash is like buying Black Friday deals on your future wealth. When you sell during a drop, you’re letting someone else buy your future gains at a discount.

Warren Buffett said it perfectly: “Be fearful when others are greedy, and greedy when others are fearful.” But here’s what he means in practical terms—when your stomach is in knots and you want to sell, that’s actually your signal to buy more.

Your Tactical Response

🎯 Create Your Panic Protocol Today:

Step 1: Write down this commitment: “When the market drops 10%, I will invest $___ more, not less.”

Step 2: Set up automatic investments that increase during downturns. Many brokers allow this.

Step 3: During crashes, log out of your brokerage app. Check it quarterly, not daily. Watching the ticker feeds the panic.

Here’s the uncomfortable truth: The market is specifically designed to transfer wealth from the emotional to the disciplined. Every crash is a wealth transfer event. You’re either on the giving end (selling low) or the receiving end (buying low).

The Real Secret:

Wealthy investors don’t have different information—they have different behavior. They buy assets when they’re on sale. They understand that market crashes are temporary inconveniences, but selling during crashes is permanent damage.

The next crash is coming. No one knows when, but it’s mathematically certain. The question isn’t whether you’ll experience fear—you will. The question is: what will you do with that fear?

Will you be the person who sells at the bottom, locking in losses and missing the recovery? Or will you be the person who looks back in five years and says, “That’s when I built real wealth”?

Your move. The wealthy are already making theirs.