The Myth of "Wait for the Market to Crash Before Investing": Why This Strategy Almost Always Fails
"I'll wait for the market to crash first, then I'll buy in." This is a phrase you may have heard from acquaintances, read in investor WhatsApp groups, or even said yourself. It sounds like a smart strategy - why buy at high prices when you can wait for cheaper ones?
But historical data from global stock markets and Bursa Malaysia reveals an uncomfortable truth: the "wait for the market to crash" strategy almost always fails. Not because it's wrong in theory, but because the combination of market probabilities, human psychology, and opportunity costs converge to make it a strategy that destroys long-term returns.
In this article, let's break down this myth using real data - when crashes actually happen, how long you need to wait, and what you lose while waiting.
Quick Answer
Stock markets historically rise MORE OFTEN than they fall. Since 1928, the S&P 500 has recorded 28 bull markets versus 27 bear markets, with bull markets averaging 992 days (2.7 years) and bear markets only 289 days (9.6 months). Between major crashes (e.g. GFC 2009 to COVID 2020 = 11 years), investors who "waited for the crash" missed returns of +126% (KLCI 2009-2014). When a real crash arrives, human psychology almost certainly won't allow us to buy in because the news at that time is "end of the world". A more effective strategy: Dollar-Cost Averaging (DCA) regardless of market conditions.
Why "Wait for the Market to Crash" Sounds Smart
The logic seems undeniable: 1. Market is high now = expensive 2. Wait until market falls = can buy cheap 3. After the fall, you get a "good deal" 4. Bigger profit when market rebounds
This strategy looks like "buy low, sell high" in the best practical form. But there are several hidden assumptions that are rarely made explicit:
- Assumption 1: You can predict when crashes happen
- Assumption 2: You'll be able to enter the market during a crash (psychology)
- Assumption 3: The crash isn't too far in the future to make sense
- Assumption 4: Cash waiting doesn't lose value
When we check each assumption against historical data, they all fall apart.
Assumption 1: You Can Predict When Crashes Happen
Based on data since 1928 (97 years of S&P 500 records):
- 27 bear markets (drops >20%) occurred
- 15 economic recessions happened
- Investors who accurately predict crashes: less than 5% of all retail investors
Why is prediction hard? Because markets move based on unannounced information: - Trump-China trade war 2025: some predicted since 2017, many got the timing wrong - COVID March 2020: almost nobody predicted the exact timing - GFC 2008: some predicted since 2006, missed the 2006-2007 rally - Asian crisis 1997: predicted generally, but exact timing/scale was hard
Each time experts predict a crash, several outcomes are possible: 1. Predict correctly, re-enter at the right time (very rare) 2. Predict correctly, but miss the rebound (common) 3. Predict incorrectly, miss the bull market (very common) 4. Predict crash every year, hit once in 10 years (broken clock)
Reuters statistics show professional Wall Street analysts are only right ~50% in predicting market direction one year ahead. That's professionals with the best data. Retail investors without exclusive data access - probability of being right is much lower.
Assumption 2: You'll Be Able to Enter the Market During a Crash
This is the most critical psychological blow. Let's think about when real crashes happen, what the news says:
March 2020 (COVID Crash)
- Headlines: "Global pandemic shuts down world economy"
- KLCI fell 30% in 5 weeks
- Everyone predicting: another 6-12 months of recession
- Lockdowns not over, COVID cases rising daily
- Sentiment: "Don't buy, market will drop another 30%"
March 2009 (After GFC)
- Headlines: "Banks too big to fail" are collapsing
- AIG, Lehman Brothers, Bear Stearns failed
- US unemployment hit 10%
- Headlines: "End of capitalism"
- Sentiment: "Don't buy, market still in free fall"
July 1997 (Asian Crisis)
- Headlines: "Ringgit free-fall, Mahathir blames Soros"
- Capital outflow, BNM defends ringgit, fails
- 1998 IMF intervenes Indonesia, almost Malaysia too
- KLCI fell from 1,278 (Feb 1997) to 263 (Sep 1998) = -79%
- Sentiment: "Asia is over, don't buy"
Now think back - would you actually buy on these days? Not in your imagination, but ACTUALLY enter the market with your capital? Almost all investors will say "no" - because sentiment is too terrible.
That's why, even if you predict the crash accurately, you still won't buy at the absolute lowest. You'll wait for "recovery confirmation" - but by then, the market has already risen 30-50% from the lows.
Assumption 3: The Crash Isn't Too Far Away
This is the biggest mathematical problem. Investors who "wait for the crash" need to deal with long timelines:
- Average bull market: 992 days (~2.7 years)
- Median bull market: 56 months (~4.7 years)
- 3 of the 10 most recent bull markets: lasted more than 2,000 days (5.5+ years)
Between major crashes: - 2009 (after GFC) to 2020 (COVID): 11 years in bull market - 2001-2002 (dot-com bust) to 2007-2008 (GFC): 5 years of bull - 1997-1998 (Asian crisis) to 2007-2008 (GFC): 9 years of bull
How long are you willing to wait? 1 year? 5 years? 11 years?
KLCI Example: Investor Who Waited From 2009
Imagine you had RM100,000 cash in March 2009 (after GFC): - Decision: "I'll wait for the next crash, then enter" - Reality: Next major crash = COVID March 2020 (11 years later)
Over 11 years: - KLCI from 838 to 1,896 (peak Apr 2014) = +126% - Returns missed: ~RM126,000 or more - COVID crash March 2020: KLCI to 1,219 (still higher than 838!)
This means, even if you "successfully" wait for the next crash, the COVID low is higher than the 2009 level. You'll enter the market at a HIGHER price than your original starting point, after waiting 11 years.
That's the bitter reality of "wait for the market to crash" in long bull markets.
Assumption 4: Cash Waiting Doesn't Lose Value
While you wait, your cash experiences:
1. Inflation
Malaysian inflation averages ~2-3% per year. Cash in savings accounts with 2-3% rates barely beats inflation (purchasing power flat).
2. Opportunity Cost
If you invested RM100k in 2009 with KLCI ETF, it became ~RM180k by 2019 (before COVID). Waiting in cash = miss RM80k.
3. Compound Loss
More critically: compound from missed early periods is lost. Money compounded for 11 years vs 1 year is hundreds of thousands of ringgit different at the end of 30-40 years.
Vanguard's study shows lump sum investors (entering market immediately) outperform DCA investors in ~64% of cases - because the market rises more often than it falls.
Important Stat: Markets Rise More Often
Let's compare the annual distribution of S&P 500 since 1928:
- Positive years: ~75% (3 of 4 years)
- Negative years: ~25% (1 of 4 years)
- Double-digit positive years (>10%): ~50%
- Bear market years (-20%+): ~10%
If you played a game where you had a 75% chance of winning, you'd keep playing, not wait for a special opportunity. The market is a positive long-term game.
For Bursa Malaysia, statistics are similar but slightly weaker because KLCI has been flatter in the last decade: - Between 2010-2024, 9 of 15 years (60%) KLCI had positive total return - Major crises (COVID 2020, mini-crash 2018, dotcom 2001) happened 3 times in 25 years
What Should You Do Instead of "Waiting for the Market to Crash"?
Statistics and psychology point to more effective alternative strategies:
Strategy 1: Dollar-Cost Averaging (DCA)
Invest a fixed amount monthly regardless of market conditions. Example: RM1,000 every month into KLCI ETF or selected stocks.
DCA advantages: - No need to predict market - Auto-buy more shares when prices are low (mathematical advantage) - Reduces emotional/timing risk - Consistency matters more than being smart
Strategy 2: Lump Sum + Rebalancing
If you have a large cash pile (RM100k+), enter all at once but: - Diversify across 8-15 different stocks/ETFs - Set a rule to rebalance annually (sell overweight, buy underweight) - No need to time the market - rebalancing auto-adjusts
Strategy 3: Core + Tactical
- 80% Core: ASB, KLCI ETF, blue-chip stocks (buy & hold)
- 20% Tactical: Cash for opportunities when they arise (mini crashes, attractive IPOs)
This strategy allows you to stay fully invested while still having cash for opportunities. When a real crash hits, the 20% tactical becomes 30-40% of portfolio - sufficient to DCA-in during fear periods.
Strategy 4: DCA + Increase During Drawdown
Combine regular DCA with rule: double DCA when market drops >15%. This is a systematic way to "buy low" without predicting when exactly the crash happens.
This strategy aligns with the approach in missing the 10 best market days - stay invested always, but add more during opportunity periods.
Investor Story: Three Approaches, Three Outcomes
Imagine three friends with RM200,000 cash in January 2014:
Ahmad (Disciplined DCA)
- DCA RM5,000/month for 10 years
- Ignores market news
- Continues during COVID March 2020 (even doubles during that time)
- 2024: Portfolio ~RM340,000 (~5.4% CAGR)
Bala (Wait for Crash)
- Keeps RM200k in Fixed Deposit
- "I'll wait for KLCI to drop to 1,000 before entering"
- 2014-2019: KLCI moves 1,600-1,900 (Bala waits)
- March 2020: KLCI drops to 1,219 (Bala panics, afraid of more drops)
- June 2020: KLCI already recovered to 1,500 (Bala misses out)
- 2024: KLCI at 1,650, Bala still in cash (eroded by inflation)
- 2024: Portfolio RM200,000 nominal, real value ~RM160,000 (purchasing power)
Chong (Lump Sum)
- Invested all RM200k in January 2014 in KLCI ETF
- Held even during COVID crash
- Reinvested dividends
- 2024: Portfolio ~RM310,000 (~4.5% CAGR)
Three people started with the same RM200k. The one who waited for the crash is the LAST place winner.
FAQ: Common Questions About "Wait for the Market to Crash"
Q: But markets are really high now, why buy at the peak? A: "High" is a relative concept. Every year the market achieves all-time highs is "high" at that moment. But statistics show buying at all-time highs historically still delivers positive returns 70%+ of the following year. Time in market matters more than perfect timing.
Q: Isn't it smarter to wait for a correction (drop 10-20%)? A: Maybe, but small corrections usually rebound quickly. If you wait for a correction, you need to be right TWICE (timing exit + timing entry). Low probability.
Q: What if I'm not waiting for a crash, but waiting to save more first? A: Great - DCA from monthly income is the best strategy. The problem is waiting with large cash piles that aren't invested.
Q: What if I just have a big cash pile from savings now? A: Better lump sum than waiting. Vanguard study shows lump sum outperforms DCA in 64% of cases. But if your psychology can't handle it, DCA over 6-12 months is acceptable - don't wait longer.
Q: But what if I know the market is in a bubble? A: "Bubble" is only clear after it pops. Many predicted bubbles in 1995, 2005, 2015 - some right (dotcom 2000, GFC 2008), some wrong (missed massive rally 2015-2020).
Q: Is there a VALID time to hold cash? A: Yes - for short-term goals (home down payment in 2-3 years), emergency funds (6-12 months expenses), or if you're on the side of tactical opportunity (max 20% portfolio). Not for "waiting for the market to crash".
Q: How is this strategy different from value investing? A: Value investing focuses on individual companies that are undervalued, not timing the overall market. Warren Buffett doesn't time the market - he times the BUSINESS. He bought Coca-Cola in 1988 (not waiting for a crash), held it until now.
Q: What if I'm already in the market and see it about to fall? A: Refer to the principle in missing the best market days: selling and trying to buy back almost always fails. Better hold + additional DCA during market falls.
When Is It Actually Right to Sell or Hold Cash?
Not all cash holding is "waiting for the market to crash". There are valid reasons:
Valid Reasons to Hold Cash
- Emergency fund: 6-12 months expenses
- Short-term goals (1-3 years): home, wedding, kids' university
- Tactical opportunities: 10-20% portfolio for specific opportunities
- Rebalancing: shifting from stocks to cash during annual rebalancing
NOT Valid Reasons to Hold Cash
- "Market looks too high"
- "Bad economic news"
- "Wait for correction"
- "Wait for bull to end"
- "Wait and see"
Difference: valid = related to personal financial situation, not valid = related to market prediction.
Conclusion
Historical stock markets rise more often (75% of years) than they fall. Between major crashes there can be 10+ year gaps of bull markets. When a real crash arrives, human psychology almost never allows us to buy at the absolute lows. The "wait for the market to crash" strategy sounds smart but data shows it almost always fails - DCA or lump sum + diversify beats market timing.
For investors who want to avoid the "wait for crash" trap and start a long-term DCA strategy, the first step is opening an account that allows stock market access.
Open a CDS account to start DCA on Bursa Malaysia as well as foreign stocks like US and Hong Kong - allowing you to stay invested across various global markets.
For DCA and long-term investing fundamentals before you start, download our Stock Investing Basics Ebook for free.