The KOSPI drops 3%. Your holdings are down over $700 from yesterday. Your hands are shaking. Do you sell now? Buy more? Just hold?

In this moment, most people make the wrong call. At the worst possible time.

The 2008 financial crisis. The COVID crash of 2020. The 2022 rate hike selloff. Markets collapse on a regular schedule. The problem isn't the crash itself — it's what individual investors do while it's happening.

1. Panic Selling — The Most Expensive Way to Lose Money

The single most common mistake in a crash is panic selling.

You hold when it drops 10%. At 15%, anxiety kicks in. At 20%, the voice in your head says "sell before it gets worse." So you sell. And then, almost mockingly, the market bounces.

This isn't a coincidence.

By the time a market is down 20–30%, institutional investors and foreign funds have already offloaded a significant portion of their positions. When individual investors flood the market with panic selling, the other side of those trades are the large players accumulating at discounted prices. The lowest price you sold at becomes someone else's cost basis.

How many people sold KOSPI at 1,400 in March 2020? The index went on to hit 3,300.

The bigger problem with panic selling isn't locking in a loss — it's that you miss the recovery. Once you sell at the bottom, it becomes psychologically very difficult to re-enter. Watching the market climb past the price you sold at is a particular kind of pain.

One question to ask before selling during a crash: "Has the underlying business broken down, or is the market in a temporary panic?"

2. Margin Trading — Putting an Expiration Date on Your Investment

"This looks like the bottom. I should borrow and buy more."

This is one of the most dangerous thoughts an investor can have.

Buying stocks with borrowed money doesn't just increase risk — it eliminates your ability to wait out the storm. A position bought with your own cash can fall 30% and still be recoverable. You wait, it comes back. A position bought with a loan starts accumulating interest charges and forces you toward liquidation.

The terrifying thing about margin calls is that you don't get to choose the timing. You get forced out at the worst possible moment, at a price you didn't choose.

In the second half of 2022, countless investors using margin debt on leveraged ETFs saw their accounts wiped out. Markets eventually recovered — but those who were forcibly liquidated never got to see it.

Debt in investing doesn't amplify potential gains. It accelerates the path to ruin.

3. Chasing Leveraged ETFs — When Compounding Works Against You

"2x leveraged ETF is down a lot. If the market recovers, I'll make double."

The logic sounds reasonable. Here's why it's wrong.

Leveraged ETFs are designed to deliver 2x (or 3x) the daily return of their benchmark index. Because they rebalance every day, they suffer from a phenomenon called volatility decay in choppy or range-bound markets.

Here's a simple example: An index starts at 100, drops 10% to 90, then rises 10% to 99. Net result: -1%.

A 2x leveraged ETF on the same index:

• Day 1: -20% → 80
• Day 2: +20% → 96

The index is down 1%. The leveraged ETF is down 4%. The higher the volatility, the worse this effect becomes.

A crash is the highest-volatility environment there is. Chasing a leveraged ETF during a crash is a situation where even if the market returns to where it started, your position still shows a loss.

Leveraged ETFs are short-term directional trading instruments. They are not built for buying the dip.

4. Chasing Momentum Stocks to Recover Losses — Turning Investment Into Gambling

When a crash wipes out a significant portion of your account, a peculiar psychology takes over.

"I've already lost so much. I need a big win to get back."

The moment this thought appears, investing becomes gambling.

Momentum stocks and trending themes are typically driven by participants who understand the game far better than retail investors. By the time individual investors pile in, the players who created the move are often already exiting. During a crash, this pattern is especially pronounced — market confusion creates more manufactured themes, and more retail casualties.

The urge to recover losses is a completely natural emotion. But before acting on it, ask one question: how many people already know about this "hot stock" before you do?

5. Overconsuming Fear Content on Social Media — Noise That Clouds Judgment

When stocks start falling, YouTube and social media flood with crash prediction content.

"This is the real Great Depression." "Index going to zero." "You're done if you hold stocks right now."

This type of content goes viral. Fear sells clicks, and content creators know it.

The problem is that sustained exposure to this type of content genuinely distorts judgment. The long historical record of markets recovering and trending upward gets drowned out by the loudest, most alarming voices in your feed.

During a crash, the right move is to consume less information, not more. The only thing worth checking is whether the core logic of your investment has actually changed. Short-term market noise requires no response.

What to Actually Do During a Market Crash

Check your cash position. A crash only becomes an opportunity if you have cash ready in advance. If you don't, surviving without panic selling is already a win.

Revisit the logic of your holdings. Has the fundamental reason you invested in something changed? If it's a temporary market panic rather than a structural problem, patience is the correct response.

Buy in stages, not all at once. Nobody knows where the bottom is. Dollar-cost averaging into a falling market is better for both returns and psychological stability.

Final Thought — A Crash Is a Test

A stock market crash tests investors — not their knowledge, but their ability to manage emotions.

Don't panic sell. Don't use margin. Don't chase leveraged ETFs. Don't gamble on momentum stocks. Don't let fear content destroy your judgment. Following these five rules alone puts you significantly ahead of the average investor during a crash.

If you want to track exchange rates and your overall financial position in one place, Super Rich Dad (슈퍼부자아빠) is worth checking out.

• iOS App Store
• Google Play