How to Invest During a Market Sell-Off Without Panic Buying
The Nasdaq-100 had its worst day since March 2020, then some chip stocks rose as much as 6% by Friday. That sharp swing captures the fear and uncertainty of a market sell-off: prices can fall fast, but a rebound can follow. Buying during a downturn may mean getting shares at lower prices, though history can’t promise a quick recovery. A written plan can help you weigh the risks before deciding what to buy.
Why investing during a market sell-off can pay off, but not always
What past sell-offs suggest
The presenter says the S&P 500 had 15 single-day drops of 4% or more over the prior 30 years. In 11 of those cases, an investor who bought the day before the drop was ahead a year later, with a typical gain of about 13%. Buying on the day of the drop was followed by a gain in 12 of 15 cases, with a typical gain of about 18%.
Those figures offer context, not a promise. The presenter also says the market often returned to its pre-drop level in less than a month, but that pattern didn’t hold every time.
Why some recoveries take longer
The dot-com crash, the period around 9/11, and the 2008 financial crisis were all lower a year after the sharp declines described in the video. In 2008, the presenter says, it took more than a year and a half for the market to return to its earlier level. Investors may need to wait much longer than they expect, or face further losses.
Fear can make a sound plan hard to follow
Warren Buffett’s advice to be “greedy when others are fearful” is easy to repeat and harder to follow when prices are falling. A sell-off can create buying opportunities, but it doesn’t make every stock a bargain. The goal is to decide in advance what you’ll buy, at what price, and how much risk you can accept.
How to invest during a market sell-off with a three-part checklist
Keep cash for sharp declines
The presenter keeps 5–10% of his portfolio in cash, which he calls “dry powder.” During ordinary dips, he continues regular dollar-cost averaging. When the market falls sharply, he increases those purchases. That’s his approach, not a rule for every investor; your cash needs and time horizon may call for a different plan.
Check that the stock has fallen enough
His first test is whether a stock has dropped roughly as much as the Nasdaq-100 did that day, within about one percentage point. Apple fell around 1.5% on the Thursday in the video, so it didn’t meet his pullback threshold. A strong company may still be a poor fit for a sell-off purchase if its price hasn’t fallen enough to meet your rules.
Review value and long-term growth
Next, he asks whether a stock trades below his estimate of fair value and whether the business can grow over several years. He keeps rolling three-year forecasts for companies on his watch list. For younger businesses that aren’t profitable, he also considers signed contracts that may turn into future sales.
AI and chip stocks on the watch list
The companies below are examples from the presenter’s list, not recommendations for every portfolio. His sales figures and growth estimates come from the video; forecasts can change and aren’t guaranteed returns.
Large companies across the chip supply chain
Nvidia designs AI chips, while Taiwan Semiconductor manufactures chips for companies such as Nvidia, AMD, and Apple. The video cites Nvidia’s quarterly sales at about $96 billion, roughly double the prior year, and a 9% drop on Thursday. Taiwan Semiconductor’s sales grew about 41%, and its shares fell around 11%. The presenter’s three-year growth estimates are about 38% for Nvidia and 25% for Taiwan Semiconductor.
ASML makes machines used to produce advanced chips. The video cites sales growth of about 55% and a Thursday share-price drop of around 9%; the presenter estimates three-year growth of 26%. AMD is a potential rival to Nvidia in AI computing. Its data-center business nearly doubled, and the video cites an OpenAI deal expected to be worth more than $100 billion over several years. AMD fell about 7%, while the presenter estimates three-year growth of 49%.
Lam Research makes equipment used in chip production. Its sales rose about 54% in the quarter cited, and the stock fell around 16% on Thursday. The presenter estimates three-year growth of 34% but flags China exposure: about a third of the company’s sales come from China. That risk is one reason growth forecasts should be weighed against the business’s potential weak points.
Smaller names tied to AI and chip demand
Credo makes data-center cables. Its sales more than tripled in the prior year, and management expected growth above 80% for the current year. But the company warned that it could earn less profit from each sale. Astera Labs makes chips that connect processors, memory, and networks in AI servers; its sales rose about 150% year over year. Rambus makes memory-interface chips, and the video says its sales reached a record, up about 22%.
IonQ sells quantum-computing systems. The presenter cites about $1.2 billion in signed contracts not yet counted as sales, but the company wasn’t profitable. Cohu makes chip-testing equipment; the video says its orders more than doubled, it had returned to profit, and it expected sales growth of 30–40% the following year. Contract value, sales growth, and future guidance don’t remove the risks that come with younger or less-proven businesses.
Limit exposure to more volatile stocks
The presenter says that, among the stocks he follows, the chance of a large-cap stock falling 40% or more in a year was about one in ten over the past decade. For small stocks, he puts the chance at about one in three. These figures describe his tracked group, not every stock, but they illustrate why he keeps smaller, more volatile holdings to a limited share of his portfolio.
A sample allocation can favor stability over the biggest bounce
The presenter’s 70/25/5 split
For a hypothetical $100 in cash, the presenter would put $70 toward large companies, $25 toward mid-sized companies, and $5 toward the smallest stocks. His reasoning is that large companies may attract buyers sooner during a rebound, while smaller companies can face sharper losses. This is an example allocation, not personal financial advice; a suitable mix depends on your goals, finances, and tolerance for risk.
Don’t chase a stock just because it bounced
The presenter’s review of past sell-offs found that large companies led small ones in the recovery periods he examined. Those past results can’t tell you which stocks will lead next time. He also points to IREN and Oklo, which rebounded more sharply than some names on his list but didn’t meet his rules for new purchases. He cites IREN’s shift from Bitcoin mining to AI cloud services and its roughly $10 billion in debt, while Oklo had no meaningful sales. He avoids chasing either stock without stronger business evidence.
Conclusion
Before the next downturn, write down your cash reserve, value checks, growth criteria, and maximum position sizes. Review your watch list on a regular schedule, and record why each company qualifies. During a sell-off, use those rules instead of rushing to buy or sell. Past rebounds can offer context, but they don’t erase the risk of loss.
The presenter says the video is for educational purposes and that he isn’t a financial adviser. Use the checklist as a starting point, then make choices that fit your own situation.