Market Crash Preparation: What to Do Before, During, and After (2026)

Almost everything useful you can do about a market crash happens before it starts. Once prices are falling, your options narrow to holding, selling, or buying, and the quality of that choice depends entirely on decisions already made: your allocation, how much cash covers near-term spending, and whether you wrote down what you would do. Preparation is the strategy; the crash is just the test.

Before: The Four Things That Matter

First, size your equity weighting to a drawdown you could hold, expressed in dollars rather than percentages. Second, hold one to three years of spending outside volatile assets, so nothing forces a sale. Third, secure your income: an emergency fund matters more than portfolio positioning, because job loss and a market fall often arrive together.

Fourth, write down what you will do at specific levels. Not a forecast, a rule: at a 20% fall I rebalance, at 35% I continue contributing and do nothing else, at 50% I still do not sell. The document's value is that the decision was made calmly by you rather than reactively at the trough.

During: Do Less, Not More

The useful actions in a decline are boring. Keep automated contributions running, because they buy more units at lower prices and continuing requires no decision if you never stopped. Rebalance to your target, which mechanically sells what held up and buys what fell. Spend from the cash bucket rather than selling equities.

In taxable accounts, harvest losses to offset realised gains, keeping the wash-sale rule in mind: repurchasing a substantially identical security within 30 days disallows the loss, so the replacement must be genuinely different. That is the complete list of productive activity.

                Both hold $600,000 and spend $40,000 a year
Investor A: no cash buffer, 90% equity
  Market falls 45%
  Portfolio at trough                 $348,000
  Must sell $40,000 of equity at the low
  Units sold are 82% more than at the peak
  Balance after 5 years               $421,000
Investor B: 3-year buffer, 70% equity
  Cash held outside markets            $120,000
  Equity portion falls 45% to          $264,000
  Portfolio at trough                 $384,000
  Spends from cash; sells no equity for 3 years
  Balance after 5 years               $548,000
Difference                            $127,000
B held less equity and finished ahead, because
A was forced to sell into the decline.
              

After: The Two Jobs Nobody Does

Rebuild the cash buffer you spent, because the next decline will arrive without notice and the buffer is what made this one survivable. Then reassess your tolerance honestly against what you actually felt and did, rather than what you had predicted about yourself.

Avoid the common post-crash error of buying whatever recovered fastest. That is performance chasing with better narrative cover, and it usually means increasing concentration precisely when valuations have already moved. Return to your written allocation instead.

1. Convert your allocation's worst historical drawdown into dollars and confirm you could hold it.
2. Hold one to three years of spending in cash at an insured institution, within the FDIC limit.
3. Automate contributions so continuing through a decline requires no active decision.
4. Write your response at 20%, 35% and 50% falls, and read that instead of the news.
5. After a recovery, rebuild the buffer first and only then revisit your allocation.