Most Investors Have Never Lived Through a Real Crash, and Dillian Says That's the Danger

The biggest risk facing many investors today may not be a particular stock or sector. According to Wall Street veteran Jared Dillian, it is inexperience. A large share of people now managing their own money started investing during a long stretch of rising prices, and they have never watched their holdings drop sharply and stay down for an extended period.

That gap matters more than it might seem. Investors who have only seen markets climb can underestimate how quickly losses can arrive and how long a recovery can take. A plan that looks sensible when everything is going up can fall apart once the decline starts, and the urge to sell near the bottom, or to hold nothing that cushions the blow, is strongest at exactly the moment it does the most damage.

Dillian's response is less about predicting the next downturn and more about being ready for one. The piece lays out a five-part strategy meant to help an investor get through a crash without abandoning a sound plan. He also says his own portfolio includes protection designed to soften a sell-off. The summary of the piece does not list every element of that approach, so readers who want the specifics will need to read the full article.

The broader lesson applies whether or not a crash is coming soon. Nobody can time a market decline reliably, so the more useful question is whether you could survive one. That means knowing how much loss you could tolerate without making panicked decisions, understanding what you own and why, and testing your plan against the possibility of a steep drop before it arrives.