Investing in Crisis Times: What the Data Really Shows

Crashes are unpleasant. But they are not the exception — they are part of the system. Anyone who invests long-term experiences at least two to three major downturns in their investing lifetime. The crucial question is not whether the next crash will come. But how you behave when it does.

The harsh truth: It is not the market that eats up your returns. It is you yourself.

What History Shows

Every crash feels uniquely terrible in the moment. Only in hindsight does it become clear how similar they are in their pattern: steep decline, longer recovery, then new highs.

Those who sold at the SMI low of March 16, 2020, exited at about 7,650 points. Six years later, the index stands at around 13,268 points — an increase of 73 percent without dividends. CHF 100,000 on the sidelines has shrunk in real purchasing power. CHF 100,000 that stayed in the portfolio would be worth around CHF 173,000 today.

The Most Expensive Return: The One You Give Away Yourself

The renowned Dalbar study has measured for decades the difference between the return an index generates and the return private investors actually achieve. The result is consistently disappointing.

Over 20 years, the average investor achieved 9.24% per year, while the index achieved 10.35%. Extrapolated to a CHF 500,000 portfolio over 20 years: the average investor gave away roughly CHF 700,000 in final wealth, purely through bad timing.

The Morningstar study "Mind the Gap" comes to a similar conclusion: over ten years, investors lose on average 1.1 percentage points per year compared to the fund return — that is about 15 percent of the total return. Sector funds are hit hardest: minus 2.6 percentage points per year. Volatile products lead to more emotional trading — and emotional trading costs money.

Why We All Make the Same Mistakes

Two psychological effects dominate every crash behavior.

Loss Aversion

The work of Nobel laureates Daniel Kahneman and Amos Tversky (Prospect Theory) shows: losses are felt about 2.25 times as strongly as equally large gains. The pain of losing CHF 10,000 feels greater than the joy of gaining CHF 10,000. In a crash, you want to stop the pain — so you sell. That this sale only cements the real loss feels irrelevant in the moment.

Recency Bias

We project recent events disproportionately into the future. After a week of red days, more red days seem inevitable. After three months of rising prices, rising prices feel like the norm. Both are wrong — but both feel right.

Anyone who knows these two biases recognizes them in themselves. Recognition alone does not heal. But it is the first step to overruling them.

Lump Sum vs. Staggered Investing

The Vanguard study examined from 1976 to 2022 whether a lump sum investment or staggered investing (dollar-cost averaging, DCA) performs better. The surprising result:

Why DCA at all? Because it is easier psychologically. Anyone who invests a fixed amount each month does not think about the optimal entry point. This prevents panic selling — and panic selling costs significantly more than the DCA disadvantage.

The best strategy is therefore usually not the mathematically optimal one, but the one you can stick with emotionally.

What You Should Actually Do in the Next Crash

The next crash will come. No one knows when. Whoever pretends to know is lying. What works instead of timing:

1. Keep automated saving.
   Your savings plan continues — especially during a crash. At the low you buy cheaply. This is not brave, but systematic.
2. Do not look at your portfolio daily.
   Anyone who checks prices hourly during a crash overloads themselves emotionally. One look per quarter is enough.
3. Build emergency fund first, then invest.
   Three to six months of expenses in cash. Those with an emergency fund do not have to sell at the worst time in a crash.
4. Take your risk profile seriously.
   If you panic at -30 percent, you were never "risk-seeking." A portfolio with 80 percent equities is not suitable for everyone.
5. Write down long-term goals.
   Why do you invest? Retirement? Home purchase? Freedom? In a crash, it helps to remember the reason.

The 2026 Context

What is the current situation? The Swiss National Bank has kept the key interest rate since March 2026 at 0.0%. Inflation is low at 0.3%, GDP growth is projected at around 1%. The SMI is trading at about 13,268 points — near the 52-week high of 13,323.

The Role of Independent Advice in a Crisis

Here it gets concrete: an independent advisor does not tell you in a crash to switch holdings, change your strategy or buy a new product — just because a commission can be earned. They tell you what you actually do not want to hear: "Stay the course."

That is not advice that generates much revenue. But that is exactly why it is most valuable in a crisis.

Conclusion

Crashes are normal. They are the price for the long-term superior return of equities. Those who do not accept them pay a different price: the lost return through emotional timing, which the average investor has demonstrated for decades.

The best strategy is rarely the most complex. It is the one you stick with. If you can honestly admit to yourself how much volatility you can tolerate, and if you have a plan you can cling to in the storm — then you are already ahead of 95 percent of investors.