Investing despite crash fears: Dollar-Cost-Averaging
August 2, 2024
5 min read
arvy's Teaser: You want to invest. But a voice in your head says: "What if everything crashes tomorrow?" That fear is normal. But it's costing you a fortune. Because the data reveals something remarkable: even someone who invested on the absolute worst day every single year — worst timing of all time — still earned an excellent return. Here's the maths. And here's the plan that makes you immune to crash anxiety.
The Fear: Why We Don't Start
Be honest: you've said or thought at least one of these:
"The market is at an all-time high — I'll wait for a pullback."
"What if a crash comes and I lose everything?"
"I'll invest once things calm down."
"Now is a bad time."
The problem: every moment feels like a bad moment. At an all-time high you think: too expensive. During a dip: too risky. During uncertainty: too dangerous. During calm: surely a crash is coming. There's always a reason to wait — and that's exactly why waiting is the most expensive decision you can make.
The Data: What Actually Happens When You Invest at the "Wrong" Time
The JP Morgan Experiment: Worst Timing vs. No Timing
JP Morgan calculated what would have happened to CHF 10,000 invested annually from 2003, under three different scenarios:
Read the last row again. Someone who stayed in cash out of fear has CHF 86,000 less than someone who invested on the worst day every single year. Worst timing beats no timing. Always.
What this means
The gap between perfect timing and the worst timing of all time: 1.5% per year. The gap between bad timing and not investing at all: 6.8% per year.
The timing problem is a luxury problem. The real problem is: not starting at all.
Every Crash Has Recovered. Every Single One.
The biggest fear: "What if the market falls and never comes back?" The historical answer: that has never happened.
Every crash feels like the end of the world. None of them were. And those with a savings plan running through the crash bought cheaper during the downturn — and profited faster in the recovery.
Why a Savings Plan Is the Best Crash Protection
A savings plan (dollar-cost averaging) means: you invest the same amount every month, regardless of what the market does. CHF 500 on January 1st, CHF 500 on February 1st, CHF 500 on March 1st — automatic, no thinking required.
Why this is genius:
1. You automatically buy cheap when the market falls
When the market drops 30%, your CHF 500 buys more shares than last month. You get a "discount." And when the market recovers, all those cheaply bought shares rise disproportionately.
A concrete example
Month 1: Price CHF 100 → CHF 500 buys 5 shares
Month 2: Crash, price CHF 70 → CHF 500 buys 7.14 shares
Month 3: Recovery, price CHF 85 → CHF 500 buys 5.88 shares
Month 4: Back up, price CHF 100 → CHF 500 buys 5 shares
Total invested: CHF 2,000 → 23.02 shares → Value: CHF 2,302
Someone who invested CHF 2,000 as a lump sum in Month 1: value CHF 2,000. Same end price, but 15% less.
2. You eliminate the timing problem
You never have to decide whether now is a good or bad time. The savings plan decides for you: always. On the 1st of the month. Done. No checking the news, no anxiety, no hesitation.
3. You build habits instead of riding emotions
The biggest investing mistakes are emotional: buying when everyone's euphoric, selling when everyone's panicking. A savings plan bypasses both. It transforms investing from an emotional decision into an automatic habit.
The Real Calculation: Savings Plan Through a Crash vs. Waiting
Take two investors. Both start with CHF 10,000 and invest CHF 500/month. Both experience a 30% crash in year one.
CHF 187,000 difference. Both invest the same amount. Both experience the same crash. The only difference: Anna kept the savings plan running. Ben sold and waited.
The invisible cost of fear
The best market days almost always come right after the worst. Those who missed the 10 best days between 2003 and 2023 lost half their total return. 6 of those 10 best days fell within the 2 weeks following the biggest drops.
If you panic-sell, you miss the recovery. And the recovery is where the money is made.
The Psychology: Why Crash Fear Feels Real — But Is Wrong
Crash anxiety isn't a sign of stupidity. It's a product of evolution. Our brains are wired to weigh losses more heavily than gains — a survival mechanism from the Stone Age. Psychologists call it loss aversion: a loss of CHF 1,000 feels roughly 2.5× more painful than a gain of CHF 1,000 feels good.
The result: you remember the COVID crash, but forget the 400% rise afterwards. You read the headline "Markets plunge" but not the report "Markets hit new all-time high" three months later. Your brain is a fear specialist, not a return specialist.
The only cure: automation. A savings plan takes the decision out of your head and puts it into a system. You don't need to be brave. You don't need to be rational. You just need to set it up once — and then do nothing.
What If I Want to Invest a Large Sum Right Now?
The most common question: "I've saved CHF 50,000. Should I invest it all at once or spread it out?"
Statistically, a lump sum beats dollar-cost averaging in ~67% of cases, because the market trends upward long-term and you benefit from every additional day in the market. But: the remaining 33% — when you invest right before a crash — feel devastating.
Our recommendation for most people:
The hybrid strategy
Invest 50% immediately. You're in the market and benefit if it rises.
Spread 50% over 6–12 months. Monthly investing. If the market falls, you buy cheaper.
Then: set up a savings plan for everything you can save monthly going forward.
This isn't mathematically optimal (lump sum would be better). But it's psychologically optimal — because you'll stick with it. And sticking with it beats optimising. Always.
Your Crash-Anxiety Survival Kit
1. Set up a savings plan. On the 1st of the month. Automatic. Never think about it.
2. Internalise your time horizon. Over 20 years, the market has never lost money. Never.
3. Remove portfolio apps from your home screen. Less checking = less panic.
4. Keep an emergency fund. 3–6 months of expenses in savings. Then you won't need to sell in a crash.
5. Tape this to your fridge: "Every crash feels like the end of the world. None of them were."
6. In crashes, invest more, not less. If you save CHF 500/month and the market drops 30%: increase to CHF 750. You're buying the sale.
"The best time to invest was 20 years ago. The second best time is today."
You don't need courage, a crystal ball, or perfect timing. You need a savings plan, a long time horizon, and the understanding that the greatest danger isn't the next crash — it's the fear that stops you from starting at all.
Crash-proof investing? Set up a savings plan.
Automatic, monthly, into 30 hand-picked quality companies. From CHF 1. Compounding does the rest — no matter what the market does tomorrow.
This article was written by Thierry Borgeat, Co-Founder of arvy, and reviewed by Patrick Rissi, CFA, and Florian Jauch, CFA.
Disclaimer: This article is for general informational purposes only and does not constitute personal investment advice. Historical returns are not a guarantee of future results. arvy is a FINMA-supervised asset manager.
