Should I Stop Investing Until the Stock Market Crashes?

I will save you the 3 minute read - NO! But if you want to read, keep going.

Every new investor has had this thought at some point (some seasoned ones are also tempted!). The market has been climbing for years. Valuations seem high. Every week there is another headline predicting a recession, warning about a bubble, or explaining why this time is different. It doesn't take much before the idea starts to sound reasonable - maybe I should stop investing, wait for the inevitable crash, and buy everything at a discount.

On the surface, it makes perfect sense. If you knew stocks were about to fall by 30%, why would you keep buying today? You can get so much for your money if you just waited a little.

The problem is that this strategy sounds much simpler than it actually is. Waiting for a crash isn't one prediction - it's several predictions stacked on top of each other. And history suggests getting all of them right is far more difficult than most people expect. Even groups of experts using supercomputers with access to tons of proprietary data can’t get this right, so what makes you think you can get it right?

The Idea Isn't Crazy

Let's start by acknowledging something that most investing articles skip over. If someone could tell me with absolute certainty that the market would fall by 35% tomorrow, I wouldn't invest today. I'd wait exactly one day and buy the same investments for substantially less.

There is nothing irrational about that decision. The problem isn't the logic. The problem is the assumption that we can know when tomorrow is. Most investors who decide to "wait for the crash" aren't comparing today's prices with tomorrow's. They're comparing today's prices with an imaginary future that hasn't happened yet. In reality, the market could fall next week, next year, or five years from now. It could also climb another 40% before finally correcting by 20%.

That's the uncertainty we have to deal with! This is why this strategy is hard to execute.

Waiting Isn't One Prediction

Most people think they're making a single prediction - the market is going to crash. In reality, they're making at least three.

First, they have to decide when to stop investing. Then they have to correctly identify when the market has actually started its decline. Finally, and this is usually the hardest part, they have to decide when to start buying again. Let me simplify the last one. You have to be able to answer this question with confidence - “Is this the bottom?”

Getting just one of those decisions wrong can erase much of the advantage of waiting.

Imagine you stop investing today because you believe stocks are overvalued. Over the next two years the market climbs another 30%, then eventually falls 20%. You successfully predicted the crash, but you're still buying at prices that are higher than where you could have been investing all along.

Being right about the existence of a crash isn't enough. You also have to be right about its timing.

History Makes This Harder Than It Looks

One of the easiest mistakes to make is looking at old market charts with hindsight. 

Looking back at the COVID crash, it seems obvious that investors should have bought aggressively in March 2020. We know today that the recovery happened remarkably quickly and that anyone who continued investing was eventually rewarded. But it didn't feel obvious at the time. 

Businesses were shutting down. Entire industries had come to a standstill. Nobody knew how long lockdowns would last or what the economic damage would be. Buying stocks in the middle of that uncertainty felt reckless, not obvious. I remember being very lucky and having about $20,000 in cash at the end of February 2020. I was worried about the spread and just sat on the cash. In late March, I felt comfortable spending a bit of that money but not all. Our offices closed, construction stopped, and I just wasn’t sure if that money would be better used as an emergency fund. By April, I felt more confident that we would keep working and getting paid so I invested the rest of the money. I benefited a little from the crash but fear and uncertainty prevented me from completely benefitting. This is a normal human behavior and why the strategy I am talking about doesn’t work well.

The same thing happened during the financial crisis in 2008. Today we know that March 2009 marked the bottom of the market. At the time, investors had no such luxury. Banks were failing, housing prices were collapsing, and there were legitimate concerns about the stability of the financial system. Waiting for "just a little more certainty" felt like the responsible thing to do.

Even more recently, many investors who stopped buying during the decline in 2022 because they expected much lower prices are still waiting. Inflation was high, interest rates were rising, and there was no shortage of experts predicting further declines. Some of those investors never resumed investing because the market recovered before they felt comfortable.

That's the part that rarely gets discussed. Market bottoms don't announce themselves. They only become obvious after they're behind us.

The Hidden Cost of Waiting

When people talk about waiting for a market crash, they usually focus on one side of the equation - buying shares at lower prices. Almost nobody talks about the cost of waiting.

Imagine two investors who both have $500 available to invest every month.

The first investor continues investing regardless of what the market is doing. The second decides to hold cash until a major correction arrives.

Three years later the market finally drops by 25%, and the second investor invests everything.

At first glance, the second investor appears to have made the smarter decision. They bought during a crash. But what happened during those three years?

The first investor accumulated shares every month. They collected dividends. They benefited from whatever market gains occurred before the decline. Even if they bought some shares at higher prices, they also bought many at lower prices along the way.

The second investor earned very little while waiting. That discount wasn't free. It came at the cost of three years of potential growth. OK, I have to acknowledge that if the second investor kept their money in a savings account or a money-market fund, they probably earned a few percentage points, but not everyone will do that. And what if you can’t deploy your cash at the perfect moment because you need to wait 1-2 business days for transfers?

Depending on what happened before the crash, that opportunity cost may be larger than the savings from buying at lower prices.

In 2022, I kept investing at regular intervals. I remember finishing the year with a ~10% loss. At the time that was the equivalent of taking all the money I invested in 2022 and setting them on fire…and then taking some more from my portfolio and also setting that on fire. But in 2023, all those shares I bought at a discount rallied and ended the year with about an 18% return. It is important to note that I was so busy with work and family that I didn’t have time to track peaks and bottoms. Even if I wanted to save cash and deploy it strategically, I simply didn’t have the time to do so and would have missed on the serious gains. Of course, I can set triggers in my brokerage account, but that also requires some vigilance and continued tinkering. This is just not time I have with two little kids and the workload. People tend to forget that human element when bringing up the strategy of investing during market crashes - you simply don’t have the time to be tracking every market change.

Even If You're Right...

Let's assume everything goes according to plan. You stop investing. The market crashes exactly as you expected. Now comes the difficult question - when do you buy?

After a 10% decline? 20%? 30%? Is perhaps a 5% correction enough to invest?

What if you invest after a 20% drop and the market falls another 15%? Do you keep buying? Do you wait again? What if the market rebounds before you've convinced yourself it's safe? These aren't hypothetical questions. They're exactly what investors face during every major decline.

The emotions that convinced someone to stop investing before the crash rarely disappear once the crash begins. If anything, they become stronger because every headline suddenly appears to validate those fears.

Successfully timing the market doesn't require one perfect decision. It requires two.

What I Do Instead

I've come to accept something that used to bother me. I have no idea when the next market crash will happen. Neither does anyone else.

I know another crash will happen eventually because they always do. What I don't know is whether it will happen next month or after another several years of gains. That uncertainty has actually simplified my investing.

Instead of trying to predict market movements, I focus on things I can control. I continue investing on a regular schedule. When prices are high, my money buys fewer shares. When prices fall, the same contribution buys more.

It's not exciting, and it certainly doesn't make for entertaining dinner conversations, but it removes the pressure of trying to outguess millions of investors around the world.

My strategy is to focus on the long-term performance. Now that I am aiming for an early retirement, I am deploying new cash into bonds, cash, and REITs. This makes me care a bit less about market performance. But to illustrate a point - my XGRO position is the highest in my portfolio. My average cost per share is ~$24. At the time of writing this post, XGRO is being traded at ~$38.30. Even if the market crashed 30%, I can sell my XGRO shares at ~$26.80 and still make a profit. Not to mention all the dividends I have received over the years (~$39k from XGRO at the time of writing this post). When you look at the long-term horizon, crashes are painful but you still end up with a profit.

Are There Times When Waiting Makes Sense?

Absolutely. If you're saving for a down payment that you'll need within a year, it probably shouldn't be invested in the stock market in the first place. The same is true if you'll need the money for tuition, a major renovation, another large purchase in the near future, or preparing to retire.

But that's a completely different decision.

That's about matching your investments to your timeline and your tolerance for short-term risk. It isn't about trying to predict whether the market will be higher or lower next month. Those are two separate conversations, even though they're often treated as the same one.

Final Thoughts

Whenever I catch myself wondering whether I should wait for the next market crash, I try to reframe the question. Instead of asking, "What if the market falls next month?" I ask, "What if it rises another 40% before it falls 20%?" Nobody knows which scenario will happen first.

History tells us that markets eventually crash, but it also tells us that markets spend far more time rising than falling. Waiting may feel like the cautious decision, but caution has a cost. Every month spent sitting on the sidelines is another month that your money isn't participating in whatever growth happens before the next correction.

For me, that's enough to keep investing. When the next crash eventually comes, and it will as it always does, I don't want to be wishing I had started earlier. I'd rather already own the investments and simply continue buying while they're on sale. Drop by drop is how you fill a bucket. Sure, it takes time, but if you start early and keep dripping, you will fill the bucket slowly but surely.

The Calculator

OK, let’s spice things up a bit and unleash this calculator. Let’s say you are the luckiest person  on this planet and can, with great certainty, make all the right predictions. How much would you benefit from waiting to deploy cash? With the help of AI, enjoy this simple calculator to test various scenarios.

One thing to note - I have gone ahead and assumed you are a disciplined person and you are keeping your cash in a savings account, or a money-market fund, that earns you some interest.

Did you notice a pattern? If you are looking at a short-term horizon, waiting to invest during a downturn usually wins. But if you look at a long-term horizon, disciplined investing usually wins unless the crash is significantly big. Also, on a short-term horizon, compound interest doesn't have enough time to flex its muscles. But how lucky can you be to predict every single downturn/market crash over 20-30 years? The luckiest person on this planet!