Introduction

I often find myself in conversations with friends where I hear questions like this: “If the crash is inevitable, when will it happen, and how should I be investing now?”

I’ve personally been predicting a market crash for quite some time now (incorrectly), and have been surprised that we keep getting a run-up of the stock market (as of late October 2025). I think many of us in the tech industry who have seen the amount of failing startups, mass layoffs, high inflation, weakening dollar, and the continued rapid rise of the stock market as highly suspicious.

I had also mentioned all of the anxiety people are feeling due to future uncertainty and geopolitical changes, and some ways of diversifying/rebalancing your portfolio in this previous blog post:

Investing in an Uncertain World

However, we know we can’t time the market, and even when large concerns are flagged it can take several years for large crashes to come. For example, Alan Greenspan (Fed chairman) famously warned of “irrational exuberance” in 1996–97, but the dot-com bubble didn’t burst until 2001.

A crash may be inevitable, but because when and how deep are uncertain, our strategy matters more than ever.

In this post, I’ll discuss practical approaches depending on whether you’re aiming for wealth preservation, highest returns possible, or a balanced blend, and how different strategies can coexist in a single plan.

The post is not meant to invent new strategies, but to help readers engineer their own finance system — combining proven approaches based on personality, discipline, and goals. Finally, I want to empower people to be able to quantitatively analyze their own scenarios and strategies if they have the time and interest.

The Three Goals

  • Wealth Preservation – You care most about avoiding major drawdowns, maintaining flexibility, and protecting capital.
  • Highest Returns Possible – You’re willing to accept volatility and drawdowns for a shot at higher gains.
  • Blended Approach – You want both upside and stability — an adaptive middle ground.

Your chosen strategy should fit both your goals and your personality. Investors often fail not because their plan was wrong, but because it didn’t fit their temperament.

Strategy Options

1. Dollar-Cost Averaging (DCA) + Opportunistic Acceleration

What: Steadily invest in broad-market funds (e.g., total-market ETFs) and plan to accelerate buying during market dislocations.

Best for: Investors seeking long-term growth while avoiding emotional market timing.

Pros:

  • Smooths entry over time and avoids decision paralysis.
  • Keeps you engaged even when headlines scream “bubble.”
  • This is a time-tested successful strategy. Even someone I know who works at a hedge-fund told me to do this!

Cons:

  • May miss upside if the market rises before a correction.
  • Requires discipline to actually accelerate when fear is high.

Tip: Define your “dislocation” trigger in advance (e.g., a 15 % drop in your index, or an official recession signal) and automate additional buying to avoid hesitation.

My take: I am and will be continuing to do this as one of my strategies.

2. “Set-and-Forget” Core Portfolio (The Bogleheads Approach)

What: A simple, diversified mix of U.S., international, and bond ETFs (e.g., 60/20/20) with periodic rebalancing.
I discussed this in a previous post: Easy Diversified Portfolio

Best for: Those prioritizing peace of mind and long horizons.

Pros:

  • Minimal management, tax-efficient, and historically beats most active funds.
  • Perfectly suited to “stay the course” investors.

Cons:

  • May not maximize returns in bull markets.
  • Less tactical flexibility if conditions change rapidly.
  • In our unpredictable future in a rapidly-changing world, this might not pan out like it did the last 100 years.

My take: This is my “engineering backup system.” Even if I did nothing else, this core would likely carry me to financial independence over time. It’s the most reasonably conservative plan that many investment gurus would recommend. I personally don’t only do this because I have fun managing money and also am skeptical the future will behave similarly to the past.

3. Hold Cash Until a Major Dip

What: Keep a sizable allocation in high-yield savings or short-term Treasuries and deploy during market downturns.

Best for: Investors convinced that a correction is near and disciplined enough to act when it happens.

Pros:

  • Provides liquidity without triggering tax events from selling.
  • Lets you strike when valuations reset.

Cons:

  • Timing risk is real — missing the market’s best 10 days can devastate long-term returns.
  • The market can stay irrational longer than you can stay patient.

Tip: Create a staged plan (e.g., deploy 25 % after a 10 % drop, 25 % after 20 %, etc.). Having rules reduces hesitation.

My take: I do some of this along with other strategies, since having cash makes me feel more at ease in a tumultuous time and I enjoy being opportunistic. Everyone tells you not to time the market, so I don’t only do this. It’s also important to keep in mind for all of these strategies that you should have a reasonable emergency fund left in a liquid high interest savings account, so you should not deplete all of your reserves to take advantage of “buy-the-dip” opportunities.

4. Proven Active Managers with Low (or Moderate) Fees

Active management can make sense — but only under specific conditions: when fees are low, discipline is high, and the manager has a long, verifiable record.
The key here is that some funds have outstanding managers who can act quickly with high flexibility to make sound decisions, instead of a common investor who does not have time to monitor a situation.

Case Studies

  • Fidelity Contrafund (FCNTX) — ~0.63 % fee, managed by Will Danoff since 1990, one of the largest active mutual funds globally.

  • Berkshire Hathaway (BRK.B) — Essentially an active management vehicle with no fund fees — shareholders gain access to Buffett’s team’s capital-allocation skills for free.

    A couple other examples are below which haven’t had as good performance as the above. I don’t own these, and don’t necessarily recommend them.

  • Vanguard PRIMECAP Fund — ~0.38 % expense ratio; long-term outperformance vs benchmark since 1984.
  • Dodge & Cox Stock Fund — ~0.41 % fee (I-class), value-oriented and contrarian, with 90+ years of firm history.

Spotlight on Will Danoff and the Fidelity Contrafund (FCNTX)

Will Danoff’s Contrafund has outperformed the S&P 500 over decades by mixing growth conviction with fundamental discipline. In 2025, Fidelity appointed co-managers Asher Anolic and Jason Weiner to ensure succession continuity after 34 years of solo management.(Bloomberg, 2025)

His strategy is a form of value investing, staying flexible and looking for quality companies with high earnings per share. You can see more on his investment philosophy here: Transcript: Will Danoff (Ritholtz, Sep 2020)

One of my concerns, is they do allocate a large portion of their funds to single stocks (e.g. META at 15% as of October 2025)

Spotlight on Warren Buffett & Berkshire Hathaway (BRK.B)

Berkshire operates as a conglomerate that behaves like a disciplined active fund — but without management fees. In 2025, its Class B shares (BRK.B) held up better than the S&P 500 during the April 2025 market dip, thanks to its large cash reserves and defensive holdings. Here is more on his investment philosophy which includes “value investing” and flexibility. You can also note BRK.B has a lower allocation in AI investments than many US index funds like the S&P 500 which can be attractive to those who feel overexposed to AI stocks at high valuations. Timeless Lessons from Warren Buffett – Mesirow Wealth Knowledge Center

Buffett announced he’ll step down at in January 2026, handing leadership to Greg Abel.
(Reuters, 2025)

🧮 Additional insight: Warren Buffett has been accumulating a very large cash position — over $340 billion — which many see as a signal that he believes the market is overvalued. Rather than trying to “buy the dip” yourself, it may be wiser to let an experienced allocator like Buffett decide when to deploy that cash. In other words, sometimes it’s better to let him buy the dip instead of trusting your own timing.
(Yahoo Finance, 2025)

Here’s an example Reddit discussion on this topic which I found interesting “Why not buy BRK.B instead of the S&P 500?” — r/Bogleheads

Relative Performance (2025 YTD):

  • Through April 2025: BRK.B ≈ +17 % YTD vs S&P 500 ≈ –6 %.
  • By October 2025: S&P 500 rebounded while Berkshire leveled off. Staying invested in S&P500 until Oct 2025 would have given better returns, but you would have depended on the current exuberance of the AI-related stock contribution (which some people may think is lucky).
  • It’s important to note, BRKB isn’t beating the market at any given time (for example in late 2025) but does behave differently than the total stock market and S&P 500.

📈 Performance Chart:

BRK.B vs S&P 500 2025 (Normalized – Corrected)
Caption: Normalized performance of BRK.B and the S&P 500) for 2025 YTD. Starting value = 100 in January; shows Berkshire’s more modest rise and eventual lag relative to the broader market after the mid-year rebound.

Why Berkshire fits:

  • Zero management fees (a holding company, not a fund).
  • Diversified across public and private businesses.
  • Massive flexibility via cash reserves and insurance float.

Caveats:

Summary on Active Management

Active funds can complement a passive core if:

  • Fees < 0.7 %
  • Proven >15-year track record
  • Transparent succession plan that inspires confidence

My take: I’m increasingly interested and have some stakes in these kinds of stocks/funds for diversification. I’m no genius manager (maybe lucky to some degree), and I trust Buffett’s and Danoff’s teams to not make irrational decisions which I sometimes am guilty of.

I’d take these funds/stocks as satellites around your passive “core,” not as replacements.

5. Alternatives — Gold, Bitcoin, Collectibles

What: Small allocations to non-traditional assets for diversification or currency hedging.

Pros:

  • Hedge against fiat currency devaluation.
  • Sometimes outperform during macroeconomic stress.

Cons:

  • High volatility and unclear intrinsic value.
  • Correlations shift over time (e.g., Bitcoin trading like tech).

My view: I think holding modest amounts is reasonable (for example 5–10 % max) to balance for inflation and devaluing currency, and to not be 100% exposed to the stock market. Collectibles are probably better suited for hobbies and fun: their value can fluctuate wildly depending on trends and can be challenging to sell.

Important note: All of the 5 strategies and different funds have different tax implications, which are important for the timing and placement of your allocations. Please see my supplemental section for further discussion.

How to Combine Strategies

Goal Suggested Mix Notes
Preservation-First Strategy 2 (core) + small Strategy 5 Focus on minimizing drawdowns
Growth-First Strategy 1 + Strategy 4 + small Strategy 5 Accept volatility for upside
Blended Strategy 1 + Strategy 2 + small Strategy 4 Balance risk, cost, and opportunity

Whatever mix you choose, align it with your behavioral comfort zone. The best portfolio is the one you’ll actually stick with when fear and greed hit extremes.

Behavioral & Structural Notes from a STEM-Investor Perspective

  • Treat investing like experimental design — define your hypothesis (goal), controls (cost, risk), and test conditions (rebalancing, triggers).
  • Research and quantitation — review performance of the funds, their strategy, and analyze their returns over different time frames to re-evaluate strategies (if not going for strategy #2)
  • You can use tools like my Monte Carlo Retirement simulator to map out different scenarios: Retirement Simulation

  • I want to note that doing your own analysis is basically free, and you can have fun doing “vibe-coding” or running available quantitative tools to analyze your own portfolio. One drawback of utilizing financial advisors is that they have a vested interest in you not retiring early so they can keep charging fees. Doing your own analysis will empower you to make your own decisions without costing any money.

    Example: A 1% AUM fee from a financial advisor on a $1M portfolio costs you ~$340,000 over 30 years in lost compound growth—money that goes directly to the advisor.

  • Fee drag compounds — even 0.3 % annual cost difference matters over decades.
  • Pre-commitment prevents panic — decide your response to a 20 % drop before it happens.
  • Iterate & review at least annually — your assumptions can go stale faster than the data.
  • This last strategy is more controversial: if you are tech insider, you can use your special knowledge of the industry (alpha) to know when there are good buying opportunities (e.g. irrational drops in tech stocks without sound fundamental drivers). Note I’m not advocating “insider trading”, I’m referring to having knowledge of the industry/trends and not utilizing company secrets! The above strategy is for those who want to get the highest chances of high returns. I would be cautious about doing this - be prepared for large potential losses that don’t recover in some cases, and don’t bet the farm. I discuss this in more detail here: Stock-picking: Is it a Fool’s Errand?

Final Thoughts

Whether or not an “AI bubble” pops, we can’t forecast timing. What we can control is our structure — building portfolios resilient across multiple futures.

  • If you crave simplicity and stability, stay with low-cost diversified ETFs.
  • If you want edge exposure, selectively use proven active managers like Buffett or Danoff.
  • If you’re tactical by nature, keep cash or alternatives ready, but follow rules, not emotions.

In the end, it’s not about guessing the crash. It’s about designing a system you trust — one that fits your psychology, protects your capital, and compounds your discipline.

References & Further Reading

  • Greenspan, A. (1996) “Irrational Exuberance” — Federal Reserve Board Speech
  • Fidelity Contrafund’s $145 B Man Gets Help After 34-Year Solo Run — Bloomberg, Apr 2025
  • Buffett to Step Down as Berkshire CEO After 60 Years at Helm — Reuters, May 2025
  • Warren Buffett Sends Investors a $344 B Message — Markets Look Overvalued — Yahoo Finance, Oct 2025
  • Three Things: BRK vs the S&P 500 — Discipline Funds, May 2025
  • The End of an Era: Buffett Bids Farewell to Berkshire Hathaway — World Finance, Jun 2025
  • How Missing the Market’s 10 Best Days Can Cost You — J.P. Morgan Guide to Markets

Related Post

If you enjoyed this analysis, you may like my earlier essay Investing in an Uncertain World which first explored how technology cycles and macroeconomic shifts shape risk tolerance and portfolio design. This new piece is its practical companion: the “how” to that earlier “why.”

Disclaimer: I’m not a financial professional (CFA or CFP). This post reflects personal views and is not financial advice. Always do your own due diligence before making investment decisions.

Supplemental Section: The Reality of Market Timing — Scenario, Data & Research

Even though most financial experts insist that “timing the market never works,” it’s worth exploring why this advice exists — and what actually happens when you try to wait for the right moment.
I’ve personally wrestled with this dilemma: it feels logical to hold cash when markets look euphoric, yet painful to watch them keep rising while you wait for the inevitable correction.
To see both sides clearly, let’s combine data, research, and personal reasoning.

1. Quantitative Example — Cash vs. Buy-and-Hold (2000–2007)

To visualize the trade-off, here’s a simplified simulation comparing two investors at the start of the dot-com crash:

Investor Starting Allocation Trigger for Action Outcome
Holder 100 % S&P 500 from Jan 2000 Stays fully invested Suffers deep drawdown, modest recovery by 2007
Timer 100 % in 4 % high-yield savings Waits for 30 % market drop, then invests Preserves cash during crash, enters at lower prices, stronger recovery

📈 Historical Simulation — Cash vs. Buy-and-Hold (2000–2007)
Cash vs. Buy-and-Hold 2000–2007
Caption: Simulated portfolio performance of an investor who stayed fully invested (“Holder”) versus one who held cash in a high-yield savings account and deployed after a 30 % market drop (“Timer”).

Interpretation:
In this rare case, the disciplined “Timer” outperformed — preserving capital through the 2000–2002 decline and entering before the 2003–2007 rebound.
This shows that if you time a crash exceptionally well, you can boost returns by keeping funds in a high-interest account before deploying.

However, this success requires perfect discipline and uncommon luck.
The same strategy would have badly lagged during other periods — for example, if the market kept rising for years before any dip.
In practice, few people actually follow through on their buy-the-dip plan when fear dominates the headlines.

A more realistic version is a hybrid: keep most assets invested, but reserve some “dry powder” (cash or short-term Treasuries) to deploy when markets show extreme declines.
This balances growth and flexibility — without depending entirely on perfect timing.

2. Counterpoint — What the Schwab Research Shows

Charles Schwab’s research team analyzed multiple hypothetical investors over decades and reached a clear conclusion:

“The cost of waiting for the perfect moment to invest — and essentially staying out of the stock market — typically exceeds the benefit of even perfect market timing.”
— Does Market Timing Work? | Charles Schwab

Key findings:

  • The “best timer,” who somehow always bought at each year’s low, only slightly outperformed someone who invested immediately at the start of each year.
  • The “worst timer,” who invested at annual highs, still did better than an investor who stayed entirely in cash for long periods.
  • Consistent, disciplined investing beat all attempts to predict short-term market moves.

In other words, the longer you remain in cash waiting for the perfect dip, the more you risk missing the market’s best days — and compounding stops working in your favor.

3. Reconciling the Two Views

Both perspectives are valid — they just apply to different human situations.

Scenario Timing Advantage Behavioral Risk
Rapid downturn (like 2000–2002) Timer preserves capital and buys low Requires nerve to deploy during panic
Long bull run (e.g., 2010–2019) Holder compounds while Timer earns minimal yield Timer underperforms and loses confidence
Uncertain environment (e.g., 2024–2025) Hybrid strategy provides balance Requires a written plan and emotional restraint

My conclusion is that timing can work only as a structured overlay, not as a full-scale replacement for steady investing.
It’s most effective when treated like an engineering variable — defined in advance, executed automatically, and never allowed to dominate the whole system.

4. Final Takeaway

You can sometimes improve results by holding cash and buying major dips — but doing it well is exceptionally difficult and can be emotionally challenging.
For most investors, staying invested through regular contributions, rebalancing, and low costs will outperform inconsistent timing attempts.
If you still want to add a timing component, do it deliberately and proportionally:

  • Keep your core invested in broad diversified ETFs.
  • Maintain a modest reserve of cash or short-term Treasuries for tactical use.
  • Define clear triggers for deployment before volatility hits.

The real goal isn’t to “beat the market” by guessing its turns — it’s to design a system that earns enough, fits your temperament, and lets you sleep at night. As I mentioned in the main section, I personally have a hybrid approach, where I expect to do some market timing. But this strategy is not for everyone.

5. Practical Note — Where to Hold Different Assets for Maximum Efficiency

Even the best strategy can lose effectiveness if your assets sit in the wrong type of account.
Here’s a quick guide I personally use when thinking about “asset location” — not just what to buy, but where to hold it for optimal tax treatment and compounding.

Asset Type Best Location Why
Index Funds (VTI, VXUS) Any Tax-efficient anywhere; low turnover and qualified dividends make them ideal in both taxable and retirement accounts.
Berkshire Hathaway (BRK.B) Taxable or Roth No dividends and rare capital gains events — efficient in taxable accounts; also fine in Roth for long-term growth.
Fidelity Contrafund (FCNTX) Roth or 401(k) Higher turnover creates short-term gains; best sheltered in tax-advantaged accounts.
Bonds / Bond ETFs Tax-deferred (401k, IRA) Interest income is taxed as ordinary income; best to keep in retirement accounts to defer taxes.
Alternatives (Gold, Bitcoin) Depends Complex tax treatment and potential volatility; hold based on personal conviction and risk tolerance. For example, gold is taxed at a higher rate than long term capital gains for ETFs and stocks

My take: I try to think of asset location as an “efficiency multiplier.”
It doesn’t change your investment philosophy — it just ensures you’re not leaking unnecessary taxes along the way. Even small improvements in after-tax return can meaningfully change long-term compounding.