Markets Down 20%: What to Do Now
August 5, 2026
5 min read
- 10% corrections occur roughly once a year on average; 20% declines are far less frequent but recur reliably. They are part of how equity markets work, not evidence that they have failed.
- The most expensive mistake is selling. It converts a paper loss into a permanent one and misses the recovery that historically follows almost immediately.
- A savings plan is most valuable during a decline, because the same amount buys more units. If you also hold spare liquidity, this is when you add.
Every investment strategy works in a rising market. Its value shows in the month when everything is red and every headline seems to agree with you.
When markets fall twenty percent, the problem is rarely the portfolio. The problem is that a decision is now on the table — and the most obvious one is the worst. This article is the playbook for exactly that moment.
01First: the context
Declines are part of how equity markets function. They are the price you pay for the higher long-run return — irregular, but reliably recurring.
Historically a broad equity market experiences an interim decline of around ten percent roughly once a year on average. Declines of twenty percent or more are less frequent, but every investor with a long horizon will live through several. Someone investing for thirty years will very likely pass through at least four or five such phases.
The most important sentence in this article: a 20% decline is not a signal that something has gone wrong. It is the event that the higher expected return of equities exists for in the first place. Without that risk there would be no premium.
02Why selling is the most expensive mistake
As long as you hold, your loss is a book entry. Selling is what makes it final. And then the harder problem follows: getting back in.
The strongest recovery days have historically followed almost immediately after the worst decline days. They occur while the news is still bad and nothing feels safe. That is precisely when nobody who has just sold in fear is buying. Which is why market timing rarely ends as a round trip in practice, and usually as a one-way street.
The measurable price: Vanguard, Morningstar and Dalbar put the gap between fund returns and actual investor returns at 1% to 1.5% a year. At CHF 500 a month over 30 years, even the lower figure is worth over CHF 150,000. More in Time in the Market Beats Timing the Market.
03What a savings plan does during a decline
It keeps buying — and it buys more. Because the amount stays constant while prices have fallen, the same money buys more units. Across an entire investing lifetime, the purchases made during a crisis are usually the most valuable ones.
That is why pausing a savings plan during a crash disables the mechanism at exactly the point where it delivers most. Suspending contributions for 24 months and never making them up costs roughly CHF 43,000 at CHF 500 a month over 30 years — not because of the CHF 12,000 in missed contributions, but because of what they would have compounded into.
The distinction that matters: pausing because your budget requires it is a legitimate decision. Pausing because prices have fallen inverts the principle — you stop buying precisely when it is cheap.
04The playbook by magnitude
At −10%
Do nothing
Frequency: roughly annual. The plan keeps running. Stop checking daily.
At −20%
Add
An additional lump sum, provided the emergency fund is intact and the money is not needed soon.
At −30% or more
Add in tranches
In stages rather than all at once, because nobody knows where the bottom is.
The decisive point: these rules must be set in advance. Deciding during the decline whether to add means deciding under the influence of exactly the emotions the rule was meant to guard against. Write your thresholds down while markets are calm.
05What you can do in the meantime
Look less often. The probability of seeing an equity portfolio down on any given day is close to half. Over ten years it has historically been very small. Your observation frequency determines which reality you experience.
Check the horizon, not the prices. The relevant question is not "how much further can it fall" but "when do I need this money". If the second answer has not changed, the strategy does not change either.
Understand what fell. A decline whose cause you understand is considerably easier to sit through than a red number without context. How portfolios came through earlier crises is covered in Investing in Turbulent Times.
06Frequently asked questions
Should I pause my savings plan during a crash?
From an investment perspective it is the least favourable moment, because the same amount now buys the most units. If budget pressure forces a change, reducing the amount is better than suspending entirely — the rhythm survives.
How often do equity markets fall 20%?
Considerably less often than 10% declines, but regularly enough that every long-horizon investor experiences several. They are part of the market rather than an exception to it.
Should I wait for the bottom before adding?
The bottom is only visible in hindsight. People waiting for it usually never buy at all. Adding in tranches over a few weeks is the workable solution, because it requires no point forecast.
When is selling actually the right call?
When your goal, horizon or life situation changes — for instance because the money is needed earlier than planned. Price movements and headlines are not a sound reason to sell.
How do I recognise a bear market?
Conventionally a decline of 20% from the peak is called a bear market. The definition is a convention, not a forecast — it says nothing about how much further or how long it goes.
Should I switch into bonds during a crash?
Switching after a drop realises the loss on the equity side and buys the defensive position after it has already performed. Your equity allocation belongs set before the crisis, not during it.
How long did recoveries take after past declines?
It varied widely — from a few months to several years. What past major declines have in common is that broad equity markets have so far always gone on to new highs. That is not a guarantee.
What is the difference between a correction and a crash?
A correction usually means a decline of around 10%, a bear market or crash 20% or more. For your behaviour the distinction matters less than the question of when you need the money.
07Keep reading
We get in touch when it gets uncomfortable
Context during declines, instead of a push notification with a red number.
arvy ETF Savings Plan
0.39% management plus 0.06% TER on the world equity portfolio, invested weekly — including during declines.
To the savings plan →This article was written by Thierry Borgeat, co-founder of arvy, and reviewed by Patrick Rissi, CFA, and Florian Jauch, CFA.
Disclaimer: arvy AG is a manager of collective assets authorised by the Swiss Financial Market Supervisory Authority FINMA under Art. 24 of the Collective Investment Schemes Act (CISA). This article is for information purposes only and constitutes neither investment advice nor tax or legal advice, nor an offer or solicitation to buy or sell financial instruments. The calculations shown are model calculations based on the stated assumptions and are not forecasts; they assume a constant return compounded monthly at the stated nominal annual rate. Past performance is not a reliable indicator of future results. Equity investments are subject to price fluctuations; losses up to the total loss of the capital invested are possible. Tax consequences differ by canton and by individual situation — please clarify yours with a professional.
