When Stock Markets Turn Red...

We know you are a successful investor. Everything in your account is going well - returns are climbing, sometimes reaching over 25%. Until suddenly, one day, you log in and see negative numbers. What will you do? Sell, Hold or Buy.

Naturally, panic and red charts can confuse everyone. But in investing, staying emotionally disciplined is key. Your actions should align with your long-term strategy, not the market’s volatility. So, if your answer is:

"Sell" - it could be a costly mistake.
"Hold" - your emotional resilience is solid.
"Buy" - you understand the rules of the game.

Warren Buffett's principle is simple: “Be greedy when others are fearful.” He actively buys stocks during recessions - time when he does the most research and analysis.

So, let’s dive deeper: Why is it better not to sell during a recession - and even better to buy? And how do you manage the panic when your return drops below -10%?

1. Economy is cyclical.

Everything in this world follows cycles - including the economy. There are 4 phases of the economic or business cycle: expansion – peak – recession – depression – recovery (or expansion). These phases continuously follow one another, usually with a tendency to grow. Therefore, recession is not a financial disaster - it is natural part of the economic rhythm. Historically, recoveries follow downturns, and investors who stay in the game benefit from the upswing.

Graph 1. The Economic Cycle, c Financial EdgeGraph

2. History will tell us.

Let’s look at the S&P 500 index, which tracks the performance of the 500 largest U.S. companies. Over the decades, we can observe several sharp declines (graph 2):

Financial Crisis in 2008: -37%
COVID Crisis in 2020: -7%
Economic downturn 2022–2023: -13%

Graph 2. Annual % Change of S&P 500 Index level (Nominal: 1990-2025)

However, despite this crisis years overall S&P 500 grew consistently and has shown remarkable long-term growth - in 2025 it reached over $6k, starting from $40 in 1957 (graph 3).

The index is regularly rebalanced to reflect the top-performing companies, making it one of the most recognized and trusted benchmarks for long-term investment. In fact, S&P 500 stocks now account for nearly half of the world’s publicly traded equity market capitalization.

Graph 3. S&P 500 Index level (Nominal: 1990-2025)

Source: Yahoo Finance Historical Dat

Therefore, ETFs that track the S&P 500 offer a more stable investment approach. By spreading exposure across hundreds of companies, this diversification helps cushion against poor performance from any single business...