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Compounding WON’T Save You in This Crash If You DON’T Do THIS Now. (EMERGENCY UPDATE) — Transcript

by Money Strategist · 6,989 words · 1,162 segments · language en · Watch on YouTube

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0:00Right now the stock market is sitting at
0:01one of the most expensive levels in its
0:04entire history. More expensive than
0:06right before the dot-com crash.
0:08More expensive than right before 2008.
0:11And almost everyone watching this has no
0:13idea because their portfolio just keeps
0:15going up and up and up. That feels good.
0:18It feels safe. But here's the part
0:20nobody wants to say out loud. The higher
0:22this goes without a real pullback, the
0:24harder the eventual drop tends to be.
0:27And when that drop comes, compounding,
0:29the thing every finance guru tells you
0:30to just trust blindly, can either make
0:33you rich beyond anything you imagined,
0:35or it can wipe out 10 years of progress
0:37in 10 months. The difference between
0:39those two outcomes isn't luck. It's one
0:41specific decision you need to make
0:43before the crash happens, not during it.
0:46And by the end of this video, you're
0:48going to know exactly what that decision
0:49is. Backed by real numbers, not
0:52opinions. So make sure to stay until the
0:54end to have a complete picture of
0:56everything. Leave a like, and let's get
0:58into it. Quick promise before we start.
1:00This isn't going to be another video
1:02telling you to just buy the dip and hope
1:04for the best. That phrase gets thrown
1:07around so much it's basically lost all
1:08meaning by now. What you're about to get
1:11is the actual mechanics behind why some
1:13people's compounding survives a crash
1:15completely intact, while other people's
1:17compounding gets permanently damaged by
1:19the exact same event. Same market, same
1:23headlines, same crash. Wildly different
1:25outcomes. That gap comes down to a small
1:27number of decisions, and I'm going to
1:29walk through every single one of them
1:31with real numbers behind each one. Not
1:33vague encouragement. Most people treat
1:35compounding like it's some kind of magic
1:37spell.
1:38Put money in. Wait, get rich. That's the
1:42story you've heard a thousand times.
1:43Einstein supposedly called it the eighth
1:45wonder of the world. And honestly, when
1:48it works, it does feel like magic.
1:50$10,000 quietly turning into 100,000,
1:53then into half a million. Just by
1:55sitting there and growing on itself year
1:56after year.
1:58But almost nobody talks about the other
1:59side of that coin. Compounding is not
2:02some indestructible force of nature.
2:05It's actually incredibly fragile at
2:07exactly the moments when you need it the
2:09most. And if you don't understand why,
2:11you are going to make the single most
2:13expensive mistake of your financial life
2:16without even realizing you're making it.
2:18Here's what makes this video different
2:20from every other one you've watched on
2:21this topic. I'm not going to tell you to
2:23just stay invested and leave it at that.
2:26Because that advice, while technically
2:28true, is useless without a plan behind
2:31it. Today I'm going to show you the
2:33actual math behind why market crashes
2:35hurt compounding so much more than
2:36people expect.
2:38I'm going to show you exactly how
2:39overextended this current market really
2:41is in 2026
2:43using real numbers, not fear-mongering.
2:47I'm going to walk you through the three
2:48specific moves you need to make with
2:50your money right now, today, before
2:52anything happens.
2:53Because once the crash starts, it is
2:55already too late to prepare. And then
2:57I'm going to show you what the data says
2:58happens to people who get this right
3:00versus people who panic. Stick around
3:02for that last part because the numbers
3:04there are honestly kind of shocking.
3:07Part one,
3:08why compounding breaks during a crash.
3:10Let's start with the math because this
3:12is the part that most content creators
3:13skip. And it's the part that actually
3:15matters.
3:16Say you put $10,000 into the market.
3:19Year one, you're up 10%.
3:21Now you've got 11,000.
3:23Year two, another 10% gain, and you're
3:26sitting at $12,100.
3:29This is compounding doing exactly what
3:31it's supposed to do. Your gains are
3:33earning gains on top of gains. Now,
3:35here's where it gets ugly. In year
3:37three, the market drops 40%. [music]
3:40A lot of people think, "Okay, I gained
3:4220% over 2 years, so a 40% drop just
3:45erases [music] those gains and eats a
3:47little bit of my original money." That's
3:49not what happens.
3:51A 40% drop on $12,100
3:54takes you down to $7,260.
3:57You didn't just lose your gains from
3:58years 1 and 2.
4:00You lost more than your original $10,000
4:02ever grew by, and you're now sitting
4:04below where you would have been if you
4:05just kept your money in cash under a
4:07mattress for 3 years.
4:09But, here's the part that really
4:10matters.
4:11And it's the part almost nobody explains
4:13correctly. To get back from $7,260
4:17to that $12,100
4:19peak, you don't need a 40% gain. You
4:22need a 67% gain.
4:24Read that again if you have to.
4:26A 40% loss requires a 67% gain just to
4:29break even.
4:30This is called the asymmetry of losses,
4:33and it might be the single most
4:34important number in all of personal
4:36finance that nobody ever teaches you in
4:38school.
4:39Why does this happen?
4:40Because percentages are calculated off a
4:42smaller base after a loss.
4:45You lose 40% off a bigger number, but
4:47you have to gain your way back off a
4:49much smaller number. The bigger the
4:51drop, the more brutal this math gets.
4:54A 50% loss needs a 100% gain to recover.
4:57A 60% loss needs a 150% gain. This is
5:00why people who panic-sell at the bottom
5:03almost never fully recover, even years
5:05later.
5:06They locked in the loss at the worst
5:08possible moment, and then they need a
5:09miracle just to get back to even, let
5:13alone get ahead.
5:14And this math gets even scarier the
5:16bigger the drop gets.
5:18A 50% loss doesn't need a 50% gain
5:21It needs a full 100% gain, meaning your
5:23money has to literally double just to
5:25get back to where it started. A 60% loss
5:27needs a 150% gain. An 80% loss, the kind
5:31we saw in some individual tech stocks
5:33during the dot-com crash, needs a 400%
5:36gain just to break even.
5:38This is why some individual stocks that
5:40got crushed during past bubbles never
5:42came back, even decades later, even
5:44while the broader market went on to hit
5:46new highs again and again.
5:48The company itself might have been fine.
5:51The math of the loss simply made full
5:53recovery almost impossible within a
5:55normal human lifetime. And if you want
5:58to survive in this crash, I've made a
5:59free video where I show you step-by-step
6:02how I'm getting rich in this crash and
6:04how you can, too.
6:06It's very easy. You can watch it in the
6:07link below.
6:09There's also a related concept worth
6:10understanding here called sequence of
6:12returns risk.
6:14It's the idea that the order in which
6:15you experience gains and losses matters
6:17[music] just as much as the average
6:19return itself, especially if you're
6:21adding or withdrawing money along the
6:23way.
6:24Two people can experience the exact same
6:26average annual return
6:27>> [music]
6:27>> over 20 years,
6:29but if one of them hits a brutal crash
6:31early on, while they're still adding
6:32money regularly, and the other hits that
6:34same crash right before they plan to
6:36retire and start withdrawing, they can
6:38end up with dramatically different
6:40outcomes, even though the math on paper
6:42looks identical.
6:44This is exactly why the timing of your
6:46preparation matters so much more than
6:48most people realize.
6:49You don't get to choose when the next
6:51crash happens. You only get to choose
6:54whether you're ready for it whenever it
6:55shows up.
6:56This single mathematical fact is the
6:59reason compounding is fragile.
7:01It's not fragile because it doesn't
7:02work. It works incredibly well over long
7:05periods of time. It's fragile because
7:07one badly timed decision,
7:09one moment of panic at the exact wrong
7:11time, can set you back by years,
7:13sometimes by a decade or more.
7:15And that brings us to the real question
7:17this video needs to answer.
7:19If crashes are this dangerous to your
7:21compounding, how likely is one right
7:23now?
7:24Let's look at where the market actually
7:25stands today.
7:27Part two. How stretched is this market
7:30right now? I want to walk you through
7:32three numbers.
7:33Not opinions, not predictions, just
7:35numbers.
7:36And then you can decide for yourself how
7:37nervous you should be.
7:39The first number is the Shiller CAPE
7:41ratio, sometimes called the cyclically
7:44adjusted price to earnings ratio.
7:46This measures how expensive the stock
7:48market is relative to 10 years of
7:50average inflation adjusted company
7:52earnings.
7:53It's a way of smoothing out short-term
7:55noise so you can see the real long-term
7:57picture.
7:58As of right now, in the middle of 2026,
8:01this ratio is sitting around 40 to 41.
8:04To put that into perspective, the
8:06long-term historical average for this
8:08ratio is somewhere in the high teens,
8:11around 17 to 18. That means the market
8:13right now is trading at more than double
8:15its long-term historical norm.
8:18This level has only been touched one
8:19other time in the last 150 years, and
8:22that was right before the dot-com bubble
8:24burst in the early 2000s.
8:26It briefly went little higher than where
8:28it sits today, but we are now in the
8:30second most expensive stock market in
8:32recorded history by this measure. And
8:34historically, when this ratio has
8:36crossed above 30,
8:38the following decade of returns tends to
8:40be significantly below average.
8:42The second number is something called
8:44the Buffett indicator, named after
8:46Warren Buffett, who once called it
8:48probably the best single measure of
8:50where market valuations stand at any
8:52given moment. This one is simple. You
8:55take the total value of the entire stock
8:57market and divide it by the size of the
8:59actual economy,
9:00the GDP.
9:02Right now, that number is sitting
9:04somewhere between 220
9:06and 230%
9:08depending on which exact data source you
9:10use. For context, before the dot-com
9:13crash, this indicator hit around 146%.
9:17Before the 2008 financial crisis, it was
9:20around 109%.
9:22We are now sitting at roughly double the
9:24level that preceded the two most painful
9:26crashes of the last 25 years.
9:29That doesn't mean a crash is guaranteed
9:31tomorrow, but it does mean the market is
9:33priced for a level of perfection that
9:35history says is very hard to sustain. If
9:37you're enjoying this video, remember
9:39that you can become a member of the
9:40channel with just a few dollars a month
9:43and it can make a huge difference for
9:44me. Thank you if you do it. The third
9:46piece of the puzzle is what's actually
9:48driving this. A huge amount of the
9:50recent gains in the market are tied to a
9:52handful of massive technology companies
9:54pouring enormous amounts of money into
9:56artificial intelligence infrastructure.
9:59We're talking about combined spending
10:00commitments in the hundreds of billions
10:02of dollars from just a few companies
10:04this year alone going toward chips, data
10:07centers, and energy infrastructure. This
10:09kind of spending has powered a genuinely
10:11historic rally. The S&P 500 just
10:14finished one of its best quarters in
10:16years hitting new record highs. That's
10:18exciting and it might keep going for a
10:20while longer, but concentrated rallies
10:23built on a small number of companies and
10:25a single dominant theme have a pattern
10:27throughout [music] history. When the
10:28theme cools off even slightly, the
10:31correction tends to be sharp because so
10:33much of the market's value has become
10:35dependent on that one narrative
10:37continuing to deliver.
10:39There's one more layer to this that most
10:41videos on this topic completely skip and
10:43it's the part that actually matters most
10:45for your day-to-day decisions. Valuation
10:48ratios like the ones I just mentioned
10:49are terrible at telling you when a crash
10:51starts. They can stay elevated for years
10:53before anything happens. What they're
10:56actually good at is telling you what
10:58kind of returns to realistically expect
11:00over the next decade and right now based
11:03on where the CAPE ratio and the Buffett
11:06sit, the honest expectation for average
11:09annual returns over the coming years is
11:12meaningfully lower than the double-digit
11:14gains people have gotten used to over
11:16the last decade and a half. That doesn't
11:18mean the market can't keep climbing in
11:19the short term.
11:21It absolutely can and it might climb for
11:23a while longer before anything changes,
11:25but it does mean you should stop
11:26assuming the next 10 years will
11:29automatically look like the last 10
11:30years because historically that
11:33assumption has been wrong at almost
11:35every point where valuations reach
11:37levels like the ones we're sitting at
11:39today. Now let's talk about the economy
11:41underneath all of this.
11:43As of right now, most professional
11:44forecasters put the odds of a US
11:46recession sometime in the next year
11:49somewhere between 15 and 35%
11:52depending on which bank or research
11:54house you ask. Some like certain
11:56analysts at Moody's have put that number
11:58as high as 40% or more at various points
12:00this year when oil prices spiked and
12:03trade tensions flared up.
12:05Others are far more optimistic, closer
12:07to 15 or 20%.
12:10The honest answer is that nobody
12:11actually knows for certain and anyone
12:13who tells you they know exactly when the
12:15next crash is coming is either lying to
12:18you or trying to sell you something.
12:21But here's what we do know for certain.
12:22The market is historically expensive.
12:25The rally is unusually concentrated in a
12:28handful of companies and one dominant
12:30theme.
12:31And even the most optimistic
12:32professional forecasters still put real
12:35non-trivial odds on a recession
12:37happening.
12:38Put those three things together and you
12:40get a market that is not necessarily
12:42doomed but is absolutely not the time to
12:45be unprepared.
12:46There are a few more pieces of the
12:47current picture worth knowing because
12:49they explain why this specific moment
12:51feels so confusing to so many people.
12:54Unemployment right now is sitting
12:56somewhere close to 4 and 1/2%
12:58which is not alarming on its own but it
13:00has been drifting upward. Inflation is
13:03running somewhere in the 3 to 4% range,
13:05still above the Federal Reserve's
13:07long-term target of 2% which limits how
13:11aggressively the central bank can cut
13:12interest rates even if growth starts to
13:15slow down.
13:16Tariffs put in place over the last
13:17couple of years continue to add cost
13:20pressure into the system
13:21even as some trade tensions have eased
13:23compared to where they were.
13:25And at the same time government fiscal
13:27policy has been leaning expansionary
13:29with tax cuts and spending meant to keep
13:31growth propped up.
13:33What you end up with is a strange mix.
13:35An economy that is not currently in a
13:37recession, growing at a modest pace,
13:40but doing so while inflation stays
13:42sticky,
13:43borrowing costs stay relatively high,
13:45and a huge share of market gains rest on
13:48the assumption that artificial
13:49intelligence spending keeps accelerating
13:51without any hiccups. That's not a
13:53prediction of doom. It's just a snapshot
13:56of a market carrying more moving parts
13:57and more risk than the smooth, steady
13:59chart on your investing app makes it
14:02look like it's carrying. Part three,
14:04crashes are normal, not rare. Before we
14:07get into what to actually do, I need you
14:09to understand something that most people
14:11get completely wrong.
14:12They treat a market crash like some kind
14:14of freak accident, a black swan event
14:16that almost never happens. That's not
14:18true. Market declines happen constantly.
14:21What changes is just how severe they
14:23get.
14:24There are three levels you need to know.
14:26The first is a correction. This is a
14:28drop of at least 10% from a recent high.
14:31Corrections happen roughly once every
14:33one to two years on average going back
14:35decades. If you've been investing for
14:37five years, and you haven't lived
14:38through at least one correction, you're
14:40actually overdue,
14:42not lucky. The second level is a bear
14:44market, defined as a drop of 20% or more
14:47from the peak.
14:48These have historically shown up roughly
14:50once every four to five years, and they
14:52tend to last somewhere around nine to 10
14:54months on average
14:55>> [music]
14:55>> before recovery begins. Compare that to
14:57bull markets, the periods where stocks
14:59are climbing, which have historically
15:01lasted around two and a half to three
15:03years on average. So, even though bear
15:05markets feel endless when you're inside
15:07one, they're actually the shorter, less
15:10common phase.
15:11The third level is a full-blown crash, a
15:13drop of 30% or more, often happening
15:16fast and violently. Think 2008, when
15:19markets fell more than 50% from peak to
15:21bottom. Think March 2020 when the entire
15:24market dropped over 30% in about 5
15:27weeks, one of the fastest declines in
15:29history. Think the dot com collapse from
15:312000 to 2002 where the NASDAQ lost close
15:34to 80% of its value from top to bottom.
15:37These events are rarer, but if you
15:39invest for long enough, decades not
15:41years, you will experience one.
15:44That's not a scary prediction. That's
15:46just what the historical record shows
15:48over and over again, decade after
15:50decade, regardless of who was in charge
15:52of the economy or what the news cycle
15:54happened to be obsessed with at the
15:55time. And here's the part that should
15:57reframe how you think about all of this.
15:59If corrections and bear markets are this
16:01frequent, then a strategy that only
16:03works when the market goes straight up
16:05isn't actually a real strategy. It's
16:08just optimism wearing a spreadsheet. A
16:10real plan has to account for the fact
16:12that at some point, probably more than
16:13once over the course of your investing
16:15life, you are going to watch your
16:17account balance shrink in a way that
16:19feels awful in the moment. The question
16:21this video is really asking is simple.
16:23When that moment comes, do you want to
16:25be the person who reacts or the person
16:27who already decided exactly what to do a
16:30long time before it ever happened?
16:32Let's actually walk through a few of
16:34these moments from history because
16:35seeing them laid out back to back makes
16:37the pattern impossible to ignore.
16:40In 1929, the market crashed close to 90%
16:44from peak [music] to bottom over about 3
16:46years, the single worst stretch in
16:48modern market history,
16:50largely driven by extreme leverage and a
16:52total collapse in confidence. In October
16:551987, on a single day now known as Black
16:58Monday, the Dow Jones dropped over 22%
17:01in a single session, the worst one-day
17:03percentage decline ever recorded. And
17:06yet the market fully recovered within
17:07about 2 years.
17:09In 2000, the dot com bubble burst and it
17:12took the NASDAQ roughly 15 years to
17:14reclaim its old highs, a brutal reminder
17:16that not every recovery is fast,
17:19especially when a crash follows a period
17:20of extreme speculation in one narrow
17:22sector.
17:24In 2008, the global financial crisis
17:26wiped out more than half the market's
17:28value and took about 5 and 1/2 years for
17:31the S&P 500 to fully recover.
17:34And in 2020, the fastest crash in this
17:37list, the market dropped over 30% in
17:39weeks and then fully recovered in about
17:425 months because this time the cause was
17:44a temporary pre-shock rather than a
17:46structural problem with the financial
17:48system itself.
17:49Notice the pattern here.
17:50>> [music]
17:51>> Every single crash in this list
17:53eventually recovered.
17:54Every one.
17:56The only variable that changed was how
17:58long the recovery took and that timeline
18:00depended heavily on what actually caused
18:02the crash in the first place.
18:04A temporary shock tends to recover fast.
18:06A structural bubble built on leverage or
18:09extreme overvaluation tends to take much
18:11longer. That's exactly why understanding
18:13where today's market valuation sit
18:16actually matters. Not because it tells
18:18you when a crash will [music] start, but
18:20because it gives you a rough sense of
18:21what kind of recovery you might be
18:23looking at if one does happen.
18:25So, here's the real question this video
18:27is trying to answer for you.
18:29If you're going to experience
18:30corrections, [music] bear markets, and
18:32eventually a full crash at some point in
18:34your investing life,
18:36>> [music]
18:36>> the question isn't whether it's going to
18:37happen. The question is whether your
18:39money is positioned to survive it or
18:41even benefit from it when it does. Part
18:43four, [music] the three moves you need
18:45to make right now. This is the part of
18:47the video everyone's been waiting for,
18:50so let's get into [music] it. Step one
18:51is protecting your foundation. This
18:53means having an emergency fund that you
18:55never touch, no matter what happens in
18:57the market.
18:59And I don't mean a week or two of
19:00expenses sitting in your checking
19:01account. I mean three to six months of
19:04your full living costs sitting in a
19:05high-yield savings account
19:07>> [music]
19:07>> where it can earn some interest while it
19:09waits.
19:10Here's why this single step matters more
19:12than almost anything else on this list.
19:14During economic [music] downturns, bad
19:17things tend to cluster together. Job
19:19losses go up. Medical bills happen.
19:21>> [music]
19:22>> Cars break down.
19:23And if you don't have cash set aside for
19:25these moments, you get [music] forced
19:27into selling your investments at the
19:28exact worst possible time.
19:31>> [music]
19:31>> Right when the market is down. Just to
19:33cover a real-life emergency. That's not
19:35bad luck. That's a lack of planning, and
19:38it is completely avoidable.
19:40A high-yield savings account right now
19:42can pay you somewhere around 4 to 5%,
19:45which won't make you rich, but it does
19:46one incredibly important job.
19:49It keeps you from ever being forced to
19:50sell your long-term investments while
19:52they're on sale. Think of it as
19:54insurance for your compounding. A quick
19:56note on how to actually build this if
19:59you don't [music] have it yet. You don't
20:00need to save it all at once, and
20:02honestly, trying to do that usually
20:04backfires because it feels overwhelming,
20:06and people give up halfway through.
20:08Break it down. Figure out your real
20:10monthly expenses.
20:11>> [music]
20:11>> Rent or mortgage, food, transportation,
20:15insurance, minimum debt payments,
20:17>> [music]
20:17>> and multiply that by 3 to 6 months
20:19depending on how stable your income is.
20:22If you're a salaried employee with solid
20:24job security, 3 months is usually
20:26enough. If you're self-employed, work on
20:28commission, or have a less predictable
20:30income, lean towards 6 months or even a
20:33bit more.
20:34Then automate a fixed transfer into that
20:36high-yield account every time you get
20:38paid, treating it exactly like a bill.
20:41You have to pay yourself first before
20:42anything else touches that [music]
20:43money.
20:44Step two is setting up dollar cost
20:46averaging and automating it completely.
20:49This strategy sounds almost too simple
20:50to work,
20:51>> [music]
20:51>> but the data behind it is remarkable.
20:54Instead of trying to guess the perfect
20:55moment to invest a big lump sum, you
20:58invest a fixed [music] amount of money
21:00on a regular schedule, every week, every
21:022 weeks, every month, no matter what the
21:05market is doing that day. When prices
21:08are high, your fixed amount buys fewer
21:10shares. When prices are low, that same
21:12amount buys more shares. Over time, this
21:16naturally brings down your average cost
21:17per share. And during a crash
21:19specifically, it does something
21:21incredible.
21:22It automatically speeds up how many
21:24shares you're accumulating at exactly
21:27the moment prices are cheapest.
21:29Let's walk through a simple example. Say
21:31you invest $200 a month into a broad
21:34index fund.
21:35Month one, shares cost $20 each, so you
21:38buy 10 shares. Then the market crashes.
21:41In month two, shares drop to $10 each.
21:45That same $200 now buys you 20 shares
21:47instead of 10.
21:49In month three, the market starts to
21:51recover. Shares climb back to $15. Your
21:54$200 buys about 13 shares. After 3
21:57months, you've put in $600
22:00and ended up with roughly 43 shares, an
22:03average cost of under $14 per share.
22:06If the market had just stayed flat the
22:07whole time at $20, you would have only
22:10ended up with 30 shares for that same
22:12$600.
22:13The crash, the scary part, the part
22:16everyone panics about, actually helped
22:18you accumulate more shares for the same
22:20amount of money. This is why crashes are
22:23not disasters for a prepared investor.
22:26They're a discount event, plain and
22:27simple.
22:28The key word here is automate. Set this
22:31up so it happens without you having to
22:33make an active decision every single
22:35month. Because when the market is
22:36falling, your account balance is deep
22:38red [music] and every news channel is
22:40calling it a catastrophe, your brain is
22:42going to scream at you to stop
22:43investing, maybe even to sell.
22:46That exact feeling, the fear you're
22:48going to feel, is precisely the moment
22:50you need to be buying more, not less.
22:53Automating this removes emotion from the
22:55equation entirely, which brings us to
22:58why that matters so much, something
23:00we'll dig into in a few minutes.
23:02One thing worth adding here, dollar cost
23:04averaging into tax-advantaged accounts
23:07first, whatever version applies where
23:09you live,
23:10a retirement account, a pension wrapper,
23:13a tax-free investing account, whatever
23:15the local equivalent is, tends to
23:17compound even harder over time
23:20because you're not losing a chunk of
23:21your returns to taxes every single year
23:23>> [music]
23:23>> along the way. That's not the main focus
23:25of this video, but it's worth mentioning
23:27because the account you use to automate
23:29this matters almost as much as the fact
23:31that you're automating it in the first
23:33place.
23:34Step three is getting your portfolio
23:36properly diversified before the crash
23:38happens, not after. [music]
23:40This one sounds obvious, but most people
23:42get it wrong.
23:43Diversification does not mean owning 10
23:45different tech companies or five
23:47different AI stocks that all move in the
23:48same direction at the same time.
23:51Real diversification means spreading
23:52your money across different asset
23:54classes, different sectors, and
23:56different regions of the world, so that
23:58when one area gets hit hard, the rest of
24:00your portfolio can absorb some of the
24:02impact. A reasonably diversified
24:05long-term portfolio might include a core
24:07position in a broad US stock market
24:09index fund, some exposure to
24:11international developed markets, a
24:13smaller allocation to emerging markets,
24:16some bonds for stability, and maybe a
24:18small allocation to real estate through
24:20REITs.
24:22The exact percentages depend on your
24:24age, how much risk you can handle,
24:27and your timeline.
24:29But the underlying principle stays the
24:30same no matter what. You never want
24:32every dollar riding on one single bet.
24:35Here's why this matters specifically for
24:37your compounding. When one part of your
24:39portfolio takes a hit,
24:41you get the chance to rebalance, which
24:43just means selling a little of what held
24:44up well and buying more of what got
24:46[music] beaten down.
24:48This forces you to buy low and sell high
24:50automatically, which is the exact
24:52opposite of what most people do on
24:54instinct.
24:55Over time, this rebalancing process
24:58meaningfully boosts your long-term
24:59returns because it keeps your
25:01compounding engine running across your
25:03entire portfolio instead of just the
25:05lucky pieces that happen to survive
25:07intact. One important warning here,
25:10diversification is much harder to stick
25:12to during good times than during bad
25:14times. When one sector or one stock is
25:17absolutely [music] on fire, it feels
25:19wrong to pull money out of it and spread
25:21it elsewhere.
25:22Why would you sell your winning position
25:24when it keeps climbing?
25:26But that exact concentration is what
25:28leaves people completely exposed when
25:30the crash actually arrives. During 2008,
25:33financial stocks fell more than 55%
25:37During the dot-com collapse, technology
25:39stocks lost more than 70% of their
25:41value.
25:42People who are heavily concentrated in
25:44those sectors didn't just lose money.
25:46Many of them lost decades of compounding
25:48progress that they never fully got back.
25:51A simple rule of thumb here, check your
25:53allocation once or twice a year.
25:56Not every day, and definitely not every
25:58time the market moves. If any single
26:00position or sector has drifted more than
26:025 to 10% [music] away from your original
26:04target because it grew so much faster
26:07than everything else, that's your signal
26:09to rebalance. This isn't about
26:11predicting the top of the market. It's
26:13about mechanically keeping your risk in
26:15check so that one incredible run in one
26:18sector doesn't quietly turn your entire
26:19portfolio into a bet on a single theme
26:23without you ever consciously deciding to
26:24make that bet. Part five, the psychology
26:27problem.
26:29I want to spend some real time on this
26:30part because I genuinely believe this is
26:32the piece that determines whether
26:34someone succeeds or fails as an investor
26:36over the long run.
26:37It's not the strategy that trips people
26:39up most of the time, it's what happens
26:41inside their own head. Here's what
26:43actually happens during a crash. Your
26:45portfolio drops, maybe drops a lot. You
26:48open your investing app and you see
26:50numbers deep in the red. And your brain,
26:52which evolved over hundreds of thousands
26:54of years to treat threats as urgent,
26:56starts screaming at you to do something.
26:59Get out. Stop the bleeding. Sell now
27:01before it gets worse. This response has
27:04a name.
27:05It's called loss aversion, and it's one
27:07of the most well-documented patterns in
27:09behavioral economics.
27:11Research from psychologists Daniel
27:13Kahneman and Amos Tversky found that the
27:16pain of losing money is roughly twice as
27:17powerful
27:19psychologically as the pleasure of
27:20gaining that same amount. In plain
27:23terms, losing a thousand dollars feels
27:25about twice as bad as gaining a thousand
27:27dollars feels good. This isn't a
27:29personal weakness. It's not a character
27:31flaw. It's biology, wired into every
27:33single one of us. But it is absolutely
27:36lethal to long-term investing if you let
27:38it drive your decisions.
27:40The solution isn't pretending you won't
27:41feel afraid.
27:43You will.
27:44Everyone does, even professional fund
27:46managers.
27:47The solution is making your decisions
27:48before the fear kicks in,
27:50while you're calm and thinking clearly,
27:52and then committing to follow that plan
27:54even when your gut is screaming at you
27:56to abandon it. This is why having a
27:58written investment plan matters so much.
28:01Actually write it down.
28:03What you're invested in and why. How
28:05much risk you're actually [music]
28:06comfortable with.
28:08What you'll do if the market drops 20%.
28:11What you'll do if it drops 40%, and
28:13roughly how long you plan to hold
28:15everything.
28:16When the crash hits and your emotions
28:17are running hot, you pull out that
28:19document and remind yourself, I already
28:21made this decision.
28:23I already knew this might happen, and I
28:25already decided exactly what I was going
28:27to do about it.
28:29One of the most powerful examples in
28:30investing history is the story of
28:33legendary fund manager Peter Lynch.
28:35He ran the Fidelity Magellan Fund from
28:371977 to 1990. And over that stretch, he
28:42delivered an average annual return of
28:44around 29%,
28:46one of the best long-term track records
28:48anyone has ever put together.
28:50But here's the part that should stop you
28:52in your tracks. Even with a fund
28:54returning 29% a year, a huge number of
28:57the investors who put money into that
28:59exact fund still lost money or made far
29:02less than they should have. Why? Because
29:04they bought in when performance was hot
29:06and everyone was excited and they sold
29:08the moment things got scary and the
29:10market dipped.
29:12They let their emotions override a
29:13strategy that was already working.
29:16The fund did its job. The investors got
29:19in their own way.
29:20This isn't a one-time story from decades
29:22ago, either. Dalbar also tracks
29:24something they call the guess-right
29:26ratio, which measures how often real
29:29investors correctly time when to move
29:30money in or out of the market. In a
29:33recent year, that ratio fell to just
29:35around 25%
29:37meaning investors guessed the right
29:38direction only one time out of four.
29:41That's worse than flipping a coin. That
29:43same research found equity withdrawals
29:46during periods of fear spiked sharply
29:48with investors pulling money out at a
29:50monthly rate of over 2% of total assets
29:53in one particularly volatile stretch,
29:56right when history says they should have
29:57been doing the opposite. People aren't
29:59bad at math. They're being out-argued by
30:02a part of their brain that's thousands
30:03of years older than the stock market
30:05itself and it wins far more often than
30:07most people would like to admit. Part
30:09six, what the data actually shows.
30:12Let's finish this with the numbers
30:14because I want you walking away from
30:15this video with a completely clear
30:16picture of what your compounding
30:18actually looks like when you get this
30:20right versus what happens when fear
30:22takes the wheel. There's a research firm
30:24called Dalbar that has spent decades
30:27tracking something called the investor
30:29behavior gap, which is simply the
30:31difference between what the market
30:32actually returned in a given year and
30:34what the average real investor actually
30:36earned after all their buying, selling,
30:39and emotional decision-making is
30:40accounted for.
30:41In 2024, the S&P 500 returned just over
30:4525%. The average equity fund investor,
30:49the real person with real money in a
30:51real account, only captured around 16
30:53and 1/2%.
30:55That's a gap of nearly 8 and 1/2
30:56percentage points in a single year just
30:59from mistiming decisions.
31:01Zoom out to a 20-year window and the
31:03story gets even more stark.
31:05Over that period, the S&P 500 delivered
31:08an annualized return of a little over
31:1010%. While the average investor only
31:13captured around 9% a year.
31:15That 1% point difference sounds small
31:17until you compound it.
31:19On a $100,000 investment left completely
31:21untouched in the S&P 500 for 20 years,
31:25you'd end up with somewhere around
31:27$700,000.
31:29The average real investor, subject to
31:31real panic and real bad timing, ended up
31:33with something closer to $350,000
31:36over that same stretch.
31:38Less than half.
31:39Same market. Same 20 years.
31:42The only difference was behavior.
31:44According to a well-known study from
31:46Fidelity,
31:47if you had invested $10,000 in an S&P
31:50500 index fund from January 1980 through
31:54the end of 2022, that money would have
31:56grown to somewhere north of $1.8
31:58million.
32:00That's over 40 years sitting through
32:01multiple recessions, multiple crashes,
32:04and endless scary headlines. But here's
32:07the twist. If you had missed just the
32:08five single best trading days during
32:11that entire 42-year stretch, five days
32:14out of more than 10,000 trading days,
32:17your ending balance would have dropped
32:18to somewhere around $670,000.
32:21Miss the best 50 days and you're down to
32:24something like $76,000.
32:26Same risk, same crashes, same volatility
32:29sat through, but you end up with a
32:31fraction of the wealth all because you
32:33weren't in the market on a handful of
32:35specific days.
32:36Here's why that number should terrify
32:38you a little.
32:39In a productive way, according to
32:40research from J.P. Morgan, a huge number
32:43of the best single trading days in stock
32:45market history happened during or
32:47immediately after crashes. Not during
32:49calm, boring periods. Seven of the 10
32:53best single day returns in S&P 500
32:55history happened during the 2008
32:58financial crisis alone.
33:00If you sold during that crash to protect
33:02yourself emotionally, you didn't just
33:04lock in your losses, you almost
33:05certainly missed the exact rebound days
33:07that made up for them.
33:09This is the cruel irony sitting at the
33:11center of panic selling.
33:13The people who sell when things look
33:15terrible are very often the same people
33:17who miss the days when everything turns
33:19around.
33:20And remember the asymmetry of losses we
33:22talked about earlier, the fact that you
33:24need a much bigger gain to recover from
33:26a loss than the loss itself.
33:28Missing those specific recovery days
33:30doesn't just cost you a little.
33:32It's devastating to your long-term
33:34outcome.
33:35Let's look at two real examples from
33:37actual market history.
33:39Between October 2007 and March 2009, the
33:43S&P 500 fell approximately 57%.
33:47If you had $100,000 invested right at
33:49the peak, you would have watched it
33:51shrink down to around $43,000.
33:54That is genuinely terrifying to live
33:56through in real time. But if you had
33:58kept investing $500 a month the entire
34:00way down and the entire way back up, you
34:03were buying shares at historically low
34:05prices throughout that entire window.
34:07Shares that went on to be worth many
34:09multiples more within just over a
34:11decade.
34:13The crash didn't hurt the disciplined
34:14investor.
34:15It quietly set them up for one of the
34:17best long-term outcomes of their
34:18investing life.
34:20The same pattern showed up again in
34:21March 2020 during the COVID crash. The
34:24S&P 500 dropped roughly 34% in about 5
34:28weeks, one of the fastest declines ever
34:31recorded. People who panicked and sold
34:33near the bottom locked in devastating
34:35losses, but the market had almost fully
34:37recovered by August of that same year,
34:39just about 5 months later. The people
34:42who stayed invested, or better yet, kept
34:44buying through the dip, went on to see
34:47extraordinary returns over the following
34:492 years. This isn't luck. This is
34:52compounding doing exactly what it's
34:54designed to do, as long as you let it
34:56work without interruption. It's worth
34:58sitting with just how different those
34:59two outcomes really were, even though
35:01both investors technically lived through
35:03the exact same crash. The person who
35:06panicked in 2020
35:08and moved everything to cash locked in a
35:10real loss and then had to make a second
35:12hard decision, figuring out when it felt
35:14safe enough to get back in, usually well
35:17after prices had already climbed back
35:18up. The person who kept their automated
35:21contributions running didn't have to
35:22make any decision at all.
35:24Their system just kept buying cheap
35:26shares on the way down and cheap shares
35:28on the way back up, without a single
35:30moment of hesitation.
35:32One person needed to be right twice,
35:34once to sell
35:35>> [music]
35:36>> and once to buy back in.
35:38The other person needed to do nothing
35:40except stay the course.
35:42That difference,
35:43>> [music]
35:43>> needing to be right twice versus doing
35:45nothing, is the entire reason automation
35:47matters as much as it does.
35:49So, let's tie this together into
35:50something you can actually [music] walk
35:52away and use. Market crashes are not
35:55rare freak events. They are a completely
35:57normal part of investing, showing up on
35:59a predictable enough schedule.
36:01Corrections roughly every year or two,
36:04bear markets roughly every four to five
36:06years, and severe collapses every decade
36:08[music] or so. If you invest long
36:10enough, you will live through all three
36:12more than once. Compounding is one of
36:14the most powerful forces in personal
36:16finance, but it is not indestructible.
36:19It can be badly damaged, sometimes for
36:21years, by emotional decisions made at
36:23exactly the wrong moment. And right now,
36:26in the middle of 2026, the market is
36:29sitting at valuation levels that history
36:31says deserve real caution.
36:33The Shiller CAPE ratio near 40.
36:37The Buffett indicator above 200%.
36:40A rally concentrated in a small handful
36:42of companies riding one dominant theme.
36:45None of this guarantees a crash is
36:46coming tomorrow, next month, or even
36:48this year.
36:50Nobody can tell you that with certainty,
36:52and you should be skeptical of anyone
36:54who claims they can.
36:55But it does mean the odds of a
36:57meaningful pullback at some point in the
36:59near future are real. And being
37:01unprepared for that is a choice, not an
37:04accident. The three things you need to
37:05do right now, before anything happens,
37:08not after, are simple. Build a real
37:10emergency fund so you're never forced to
37:12sell your investments at the worst
37:14possible moment. Set up and fully
37:17automate dollar cost averaging, so
37:18investing becomes a system running
37:20quietly in the background instead of a
37:22decision you have to make under
37:23pressure.
37:24And make sure your portfolio is
37:26genuinely diversified, so that no single
37:28sector or theme can wipe out everything
37:31you've spent years building.
37:33And underneath all three of those, write
37:35your plan down.
37:36Commit to it on paper before the fear
37:38ever shows up. And don't let a temporary
37:41crash talk you out of a strategy that
37:43the data has proven over and over across
37:46every single decade of market history
37:48actually works.
37:50Think about the two paths one more time,
37:52side by side.
37:54On one path, someone sees the market
37:56drop, panics, sells everything, and sits
37:58on the sidelines waiting for things to
38:00feel safe again.
38:01By the time it feels safe, the market
38:03has usually already recovered most of
38:05its losses, and that person buys back in
38:07near the top. Having locked in a loss
38:09and missed the rebound, the exact
38:11scenario the Fidelity data and the JP
38:13Morgan data both point to.
38:16On the other path, someone has an
38:17emergency fund already in place, so
38:19they're never forced to sell anything.
38:22They have dollar cost averaging
38:24automated, so the crash quietly becomes
38:26a discount event that builds them more
38:28shares for the same money.
38:30And they have a diversified, rebalanced
38:32portfolio, so no single sector wipeout
38:35can take down everything they've built.
38:37Same market, same crash,
38:40same headlines.
38:41Two completely different outcomes,
38:43[music] and the only variable that
38:44changed was preparation that happened
38:46before anything went wrong.
38:48The people who come out of a crash
38:49richer than they went in
38:51>> [music]
38:51>> aren't smarter than everyone else, and
38:53they definitely aren't luckier.
38:55They're not reading charts nobody else
38:56has access to,
38:58and they're not getting some kind of
38:59inside information. They're just
39:02prepared
39:02>> [music]
39:03>> ahead of time before the panic ever
39:04starts, using the exact same publicly
39:07available accounts and the exact same
39:09publicly available information that
39:11everyone else has access [music] to.
39:13The only difference is they made the
39:15decision early, wrote it down, and stuck
39:18to it. And now,
39:19>> [music]
39:20>> so are you.
39:21If this helped you think more clearly
39:22about your money, subscribe and watch
39:24the video in the link below
39:25>> [music]
39:26>> to understand how I'm getting rich in
39:27this crash. Just a reminder, I'm not a
39:30financial advisor. This video is for
39:32educational purposes only, and any
39:34results depend on your own decisions and
39:37actions.

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