Complete Analysis of 5 Market Crash Trigger Points

📉 Understanding Market Decline Patterns

To properly utilize Morgan Housel's trigger-based investment strategy, you need to understand how often each trigger point has historically occurred. Let's examine each one using JP Morgan Asset Management research.

1️⃣ First Trigger: -10% (Annual Drawdown)

Investment Rule

• Investment Amount: $100 out of $1,000 (10%)
• Frequency: Approximately every 11 months

Historical Data

According to JP Morgan's research, the S&P 500 experiences an average intra-year decline of 14% even in years with positive overall returns.

This is a surprising fact. Even in years with good annual returns, there's usually a period where the market drops 10% or more.

💡 Key Point: This trigger has been activated dozens of times over the past 45 years. It's the most frequently available opportunity.

2️⃣ Second Trigger: -15% (Correction Territory)

Investment Rule

• Investment Amount: $220 out of $1,000 (22%)
• Frequency: Approximately every 2 years

Historical Data

Declines of 15% or more occur in the S&P 500 about once every two years. Historical examples:

• 2022 inflation correction
• Early 2020 COVID crash
• December 2018 plunge
• 2015-2016 China concerns

💡 Key Point: Corrections come more often than you think. Additional investment during these periods can significantly lower your average cost basis.

3️⃣ Third Trigger: -20% (Bear Market Entry)

Investment Rule

• Investment Amount: $300 out of $1,000 (30%)
• Frequency: Approximately every 4 years

Historical Data

A 20% decline marks the official start of a bear market. This occurred about 9 times over the past 45 years:

• 2022 (Tech bubble burst)
• 2020 (COVID panic)
• December 2018
• 2011 (European debt crisis)
• 2008-2009 (Financial crisis)
• 2000-2002 (Dot-com bubble)

💡 Key Point: Investing $300 in a bear market can yield significant returns during the subsequent recovery.

4️⃣ Fourth Trigger: -30% (Severe Bear Market)

Investment Rule

• Investment Amount: $270 out of $1,000 (27%)
• Frequency: Approximately every decade

Historical Data

Declines of 30% or more occur very rarely:

• March 2020 (COVID bottom)
• 2008-2009 (Financial crisis)
• 2000-2002 (Dot-com bubble)

💡 Key Point: Buying at this level is like purchasing stocks near historical bottoms.

5️⃣ Fifth Trigger: -40% to -50% (Generational Crash)

Investment Rule

• Investment Amount: All remaining ($110)
• Frequency: A few times per century

Historical Data

Over the past 45 years, this trigger was activated only once: the 2008 financial crisis. The 50% decline level was also reached only during this period.

💡 Key Point: The rarest trigger, but when it occurs, it becomes a life-changing investment opportunity.

📊 Complete Summary

Trigger	Investment	Cumulative	Frequency
-10%	$100	$100	Yearly
-15%	$220	$320	2 years
-20%	$300	$620	4 years
-30%	$270	$890	10 years
-40%+	$110	$1,000	Rare

🎯 Key Takeaway

The beauty of this strategy is that most funds are allocated to smaller, more frequent declines. At the same time, it reserves capacity to respond to extreme crashes.

In the next article, we'll explore the psychological and practical advantages of this strategy and how to actually implement it!