Preparing for the Next Stock Market Crash

Over the past 23 years, the NASDAQ Composite endured three brutal bear markets—and still generated a cumulative return of approximately 1,838%. A $10,000 investment grew to nearly $190,000

An investment newsletter from Inside Edge Capital landed in my inbox recently with a statistic that made me stop: over roughly the past twenty-three years, investors have lived through three brutal bear markets.

The Global Financial Crisis cut the NASDAQ by more than 50%. The COVID crash erased roughly 30% of its value in just a few weeks. The 2022 technology selloff took another 30–35% off the market.

Those declines were painful and erased enormous amounts of wealth. They tested investors’ conviction and resolve to stay in the market or hide their money under a mattress.

Yet over that same 23-year period, the NASDAQ Composite generated a cumulative return of approximately 1,838%, driven by the extraordinary growth of companies like Apple, Microsoft, NVIDIA, Amazon, Google, Meta, TSMC, and many others. A $10,000 investment became nearly $190,000 despite those three major bear markets.

That raises an interesting question. How do we focus on the long-term 1,838% cumulative return instead of the short-term substantial declines of 30-50%?

**Today’s headlines are once again warning that stocks are overvalued and a market correction may be imminent. **

Like most investors, I pay attention to market risks and occasionally wonder what might trigger the next major decline. Every year brings convincing reasons to become defensive. Markets become overvalued. Inflation resurfaces. Interest rates rise. Governments borrow too much. Wars begin. Sometimes those concerns prove completely justified.

The difficult part isn’t recognizing the risks — there are plenty of them. It’s knowing when they will matter.

Suppose I believe that technology stocks have become too expensive and a correction will cause the market to drop in the next few months.  I decide to move much of my portfolio into cash. But what if my timing is wrong and the correction doesn’t arrive for another six months or perhaps even two or three years. Those companies will continue launching new products, growing earnings, expanding into larger markets, and strengthening their competitive positions. By the time the correction finally arrives, I may have missed more upside than I avoided on the downside.

Being right about a correction isn’t enough. You also have to be right about when it happens — and how long it will last. Some corrections are a short “V” and recover in weeks. Others are a long “U” and take years for a full recover (Dot-Com bust in 2000). Some corrections recover within weeks. Others take years. (As of July 2026, many of the corrections during President Trump’s second administration have been sharp “V”-shaped recoveries. Exiting those declines would have meant missing much of the subsequent rebound and cumulative gains of 25%.)

Investing When a Market Correction is Imminent

I’ve gradually stopped asking myself when the next market decline will happen. Instead, I’ve started asking a different question.

Do I believe that the global economy and companies I invest in will continue growing in spite of short-term corrections?

That subtle shift has changed how I think about investing.

I don’t invest because I expect the market to be higher next year. I invest because I believe exceptional businesses will continue creating value over the next decade. They’ll build better products, solve more important problems, enter larger markets, and strengthen their competitive advantages. If I’m right about those businesses, I expect their share prices to eventually reflect that progress, even if the journey includes some painful market declines.

I’ve seen this repeatedly with companies like NVIDIA, TSMC, and ASML. There have been times when each looked expensive, and sometimes those concerns were justified. But while investors debated valuations, the businesses kept improving. They built better products, expanded into larger markets, and created substantially more value. That’s why I focus first on the quality of the business, then on whether I’m paying a reasonable price.

I don’t want to overpay for an exceptional company. I also don’t want to spend years waiting for the perfect entry point while that company continues creating value.

Market Corrections Create Opportunities

Every major market decline has eventually become part of a much larger long-term advance.

That doesn’t make bear markets enjoyable. Watching a portfolio decline by 20%, 30%, or more is painful for every investor. But history also tells another story. Innovation doesn’t stop because markets become fearful. Great companies continue building products, serving customers, increasing earnings, and expanding into new markets. Eventually, the market catches up with those fundamentals.

When meaningful declines do occur, they often create opportunities. Companies I’ve wanted to own become available at more attractive prices. Existing positions can be expanded. Tax-loss harvesting can improve after-tax returns while allowing capital to be redeployed into stronger businesses. Those opportunities don’t require me to know when the next correction will begin. They simply require me to expect that, sooner or later, it will.

Conclusion

I have no idea what will trigger the next market decline. It may be inflation, excessive valuations, geopolitics, a recession, or something nobody is discussing today. Fortunately, I don’t think I need to know.

I’d rather spend my time understanding exceptional businesses than trying to predict exceptional headlines. That’s a problem I can actually solve.

The goal isn’t to avoid every market decline. It’s to make sure the years of growth before the next decline more than outweigh the decline itself.

I have no reason to believe the next market cycle will be any different.