The core concepts of the "Crash Buying" investment philosophy and strategy

 The core concepts of the "Crash Buying" investment philosophy and strategy:

---

1. Philosophy & Mindset: Fear Management

• Core Problem: Market crashes trigger instinctive panic because they feel chaotic, severe, and endless.

• Solution: Replace fear with knowledge. Understanding the historical frequency of declines and the mathematics of recovery transforms the unknown into a manageable probability.

• Key Mindset Shifts:

  • It’s okay to miss a crash. Drawdowns are statistically regular; another opportunity will come.

  • The goal is participation without breaking. The market rewards discipline and punishes emotional abandonment more than it rewards perfect timing.

  • Crash buying is not about bravery; it's about preparation, probability, and emotional neutrality.

2. Foundational Data: Historical Drawdown Distributions (S&P 500, 100 Years)

• Declines are tiered and predictable in their frequency:

  • -10%: Common. Happens ~every 3 years. A normal correction.

  • -15%: Uncomfortable but frequent. ~Every 4-5 years.

  • -20%: Serious. Bear market territory. ~Every 6-7 years.

  • -25% to -30%: Rare, crisis-level events. ~Once per decade.

  • Beyond -30%: Very rare, requiring systemic failure. Generational events (e.g., 2008, Great Depression).

• Takeaway: Severe crashes are statistically rare. A -15% decline is routine, not catastrophic. This knowledge calibrates emotional response.

3. The Recovery Mathematics: The Answer to "How Long Will I Be Stuck?"

• The critical question for investors is not just frequency, but time to breakeven from their specific entry point.

• Historical Pattern: The deeper you buy into a decline, the shorter your historical recovery time to your purchase price.

  • Entry at -10%: Typical breakeven in 3–4 years.

  • Entry at -15%: Typical breakeven in 2–3 years (~1 year faster than -10%).

  • Entry at -20%: Typical breakeven in 1.5–2 years (significantly accelerated).

• This creates a powerful mathematical advantage for patient, deeper entries.

4. The Personal Strategy: Scaled, Incremental "Crash Buying"

• Execution Logic (The "How"):

  • Rule: No buying before a -10% decline.

  • Method: Use incremental "shots." Start small at -10%.

  • Scale: Increase position size with each subsequent ~2.5% decline (e.g., small → medium → large → heaviest).

  • Peak Deployment: Reserve the largest capital allocation for the -25% to -30% range.

• Core Doctrine: "Save your courage for ~25%, not ~10%." Courage and capital should increase as the statistical outlook (frequency + recovery math) improves, even though fear is highest.

• Trade-Off Acknowledged: While deeper entries recover faster, waiting for them risks missing the dip entirely if the market doesn’t fall that far.

5. The Integrated System: Why the Scaled Approach Works

• It balances two objectives:

  1. Prevents Inaction: Small early positions at -10% ensure you participate and don't miss shallower corrections.

  2. Optimizes Capital & Psychology: Larger positions at deeper levels (-15%, -20%+) benefit from faster recovery, reducing emotional stress and financial uncertainty.

• The Inversion: This strategy inverts natural human impulse. Instead of buying less as prices fall (driven by fear), you buy more, guided by data.

6. Why Investors Fail & How to Succeed

• Why Most Fail (The Knowledge Gap): They lack understanding of frequency distributions and recovery math, overestimate psychological pain, and fail to prepare with a Financial Safety Net and Emotional Neutrality techniques.

• How to Succeed:

  • Prepare: Have a plan, a safety net, and emotional training before a crash.

  • Execute with Discipline: Stick to the scaling plan. Breaking discipline is far more dangerous than missing a single opportunity.

  • Focus on Process, Not Perfection: You don't need to predict the bottom. You need to participate without breaking.

---

Final Summary in One Sentence:

Crash buying is a disciplined, data-driven strategy of incrementally scaling into market declines—starting small at -10% and deploying the most capital at the deepest, rarest levels (-25% to -30%)—based on the historical probabilities of drawdowns and the accelerated recovery mathematics that favor deeper entries, all managed by overcoming fear through knowledge and preparation.