How to Profit From the Next Stock Market Crash

Discover an investment strategy that thrives not only in normal times but especially during market downturns. In this video, I explain the principles behind this approach, including why people rush to safety in U.S. treasuries and how long-term bonds can yield substantial returns during stock market crashes. With real examples from past market corrections, I’ll show you how this strategy performed in turbulent times like 2008 and 2020—and when it might not work, such as in high-inflation environments.

I’m Ethan, a CFA charterholder dedicated to helping you become a better investor. Whether or not this strategy is for you, understanding these concepts can transform your investment perspective.

The two ETFs I discussed were TLT and TMF.

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[FundamentalsofFinance]

If you want to learn more about investing from a CFA Charterholder currently in the industry, join our

[raghavendrasunku]

Wow, super timing again. I just started adding EDV in my portfolio. Was thinking in same lines added day before inflation report and I am already up by few percentage.

[adrianytk]

Omg lol, I'm listening to this because I'm trying to get my parents to more responsibility diversify/invest too. Goldman's private wealth ppl put out research on how long term treasuries aren't a good inflation hedge and how ppl should hold through downturns but don't basically. Reminds me of why this strategy makes sense in principle.

[Zdasdeweewerwerwer]

So glad I saw this video when it came out. TMF doing will the last week.

[BelleOmbreGrey]

This is a great tutorial video . But, I have to ask why at 8:16 do you change the format. Up to that point the red line is the earlier dated curve blue the later date. You start the video saying "if the blue line is below the red line then rates have dropped" and then suddenly when discussing 2022 you flip the format!?!? With no explanation

[rsy-qf]

Hi Ethan. What do you think of TLTW for a play like this? Would that limit upside or would the high dividend make total returns a good play?

[GregorF-HansS]

I keep buying TLT and TMF at these levels. I'm somewhat certain the 5% is the ceiling on longer term-rates.

[theditto]

I’m in blv. It has corporate bond exposure and is more diversified as tlt, but I also think blv is 10year? Are blv and tlt too different to compare in your thesis of going into tlt now?

[anutkandhadai]

Im trying to create a portfolio for my mother who is 55 years old. She will likely retire in 10 years. Moderate risk tolerance. I was wondering what % allocation in US stocks, international stocks, bonds, growth ETFs, dividend ETFs etc you would recommend from your experience? Also, do you recommend multiple different ETFs for each category or keeping it simple (for example, only using VOO for US market exposure)? Additionally, do you prefer lump-sum investing or DCA and if so, over a period of how long? Thanks in advance! I really enjoy learning from your videos.

[ikerp]

Very good video, as always. As an european investor, I always find myself trying to find the european equivalent to american etf-s. Are the ones with the tickers SXRC and IS04 equivalent (or considerably similar) to the non leveraged etf shown in your video?

[marcosdepaula]

Great video, I invested directly in 4.5% 10yr treasuries around May 2024 then purchased BLV around the same time. I am currently down 10% but I think I will add to my strategy using TMF and TLT instead of the BLV.
What are the mechanics of a "leveraged" ETF? What makes it so much riskier?

[specialist-in-tech]

Everybody is dumping treasuries and the dollar right. In a market crash in 2025, they won’t be going into bonds, as yields will be rising exponentially. The Fed will be doing yield curve control.

[p.c.h.]

Hi, I have 2M in cash... would you recommend putting all that money into TMF right now?

[dennis]

Takes a bit of good timing. Does not always work that well. 2001 and 2008 crashes in hindsight are cherry picked compared to history. Stock Market vs 10-yr T-bonds: 1930 Stocks -25% / Bonds +5%; 1931 Stocks -44%, Bonds -3%; 1937 Stocks -35%, Bonds +1%; 1975 Stocks -26%, Bonds +2%; 2002 Stocks -22%, Bonds +15%; 2008 Stocks -37%, Bonds +20%; 2022 Stocks -18%, Bonds -18%. Only 2002 and 2008 era did this strategy work well.

On average there are 8 years between stock market crashes greater than 20%. If market corrects by 20%, then rates likely have fallen by 1%. Duration of 30-yr bond is about 16 years. Therefore, we expect a 20% correction in stocks to cause a 16% gain in bonds. However, during a non-crash year, stocks have about twice the return as bonds (10% vs 5%). Eight years of 10% gains followed by a 20% crash, equates to an annualized return of 6.2 percent for stocks. Eight years of 5% gains followed by a 16% gain (as stocks crash 20%), also equates to an annualized return of 6.2% for bonds. Same result either way.

I prefer to focus on return vs duration. If the return-to-duration ratio (think reward-to-risk ratio) for stocks is lower than bonds, go with bonds, otherwise stick with stocks. Allocate the proper percentage to stocks or Long-Term T-Bonds based on your investment horizon. Keep the remaining cash as dry powder in Money Market or Short-Term T-Bonds.

Just adding to the conversation.

[RRedmondiy]

Ethan i wish you were in my country/ local, you would be a good person to have a pint with

[dougmanck]

So in this video you say in times of fear investors move from stocks to bonds but in the past you have been adamant that the reverse doesn't occur. Hmmm

[riskybiscuits]

You’re doing too much, E. VOO and chill 😎

[beny.]

If inflation picks back up you're screwed 😂 good luck betting on that not happening with all the money printing and debt issuance 😂

[lllllllll]

Lol. Doubling your money in 2020 took zero skill.

[Ciborium]

I like EDV. I would only lost -11.5% over the past year and -51.7 over the past five years. If I had only *shorted* EDV, I'd be rich.