How to deploy your cash during a crisis?
One mistake I've seen investors make is going all in too early. They see prices fall 20% and think they've found the bottom. They deploy all their cash. Then prices fall another 30% and they have nothing left to buy at the truly bargain levels.
The solution is to scale into positions gradually. Don't try to call the exact bottom. Nobody can do that consistently.
Instead, plan to deploy cash in trenches as prices fall. For example,
- you might deploy 10% of your cash when prices fall 20% from the peak.
- another 15% when prices fall, 30%,
- another 20% when prices fall, 40%, and so on.
If prices keep falling, you have cash left to take advantage. If prices reverse, you've already established positions that will benefit from the recovery.
I followed this approach in 2008 and 2009. I started buying when the crisis began, but reserved most of my capital for later. As prices fell further, I deployed more. By the time we reached the bottom, I had made significant investments but still had powder left for opportunities that emerged in the following months.
What to buy first?
Another consideration is what to buy first. During a crisis, almost everything goes on sale. Stocks, bonds, real estate, private businesses. You can't buy everything. You have to prioritize.
My priority is always quality first. I'd rather buy a great business at a good price than a mediocre business at a great price. The great business will recover and compound for decades. The mediocre business might never recover or might recover slowly and then stagnate.
So I start by looking at the best businesses, the ones with the strongest competitive positions, the most capable managements, the most resilient business models. If those businesses are available at attractive prices, that's where I deploy capital first.
Only after I've invested in the highest quality opportunities do I consider lower quality businesses that might offer higher potential returns, but also higher risk. These can work out spectacularly. But they can also fail entirely. I size these positions smaller and only pursue them after the core portfolio is established.
https://www.youtube.com/watch?v=Xv9TV-dI7z4
Warren Buffett: Why 2026 Will Be the Best Buying Opportunity Since 2009
Summary of Investment Strategy During a Crisis
The article outlines a disciplined approach to deploying cash during a market downturn, emphasizing patience, gradual investment, and a focus on quality. Key points include:
1. Avoid Going “All In” Too Early
Common Mistake: Investors often use all their cash after an initial market drop (e.g., 20%), leaving them unable to capitalize on deeper declines.
Solution: Scale into positions gradually as prices fall, rather than trying to time the exact bottom. This ensures capital is preserved for true bargain levels.
2. Deploy Cash in Trenches
Example Strategy:
10% of cash deployed after a 20% decline from peak.
15% more after a 30% decline.
20% more after a 40% decline, etc.
Benefits:
Buys more at lower prices if the downturn continues.
Maintains “dry powder” for future opportunities.
If markets recover early, positions are already established to benefit.
3. Prioritize Quality Investments
Focus on Quality First: Invest in high-quality businesses with strong competitive positions, capable management, and resilient models, even if the price is only “good” rather than “great.”
Rationale: Quality businesses are more likely to recover and compound value over decades.
Higher-Risk Opportunities: Consider lower-quality, higher-potential investments only after building a core portfolio of quality assets, and size these positions smaller.
Discussion
The article provides a pragmatic, risk-managed framework for crisis investing. Its core principles—gradual deployment and quality-first selection—reflect lessons from historical crises like 2008–2009. By avoiding impulsive, all-in bets, investors can reduce regret and remain agile. The emphasis on business fundamentals over sheer cheapness aligns with long-term value investing philosophy, where durability matters more than short-term price movements. This approach balances opportunity capture with psychological discipline, making it suitable for investors seeking to navigate volatility systematically.
