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Antoine Bouvy

Antoine Bouvy

24 Apr 2025
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Investing in ETFs during a crisis: wise strategy or risky gamble?

When financial markets turn red, investor anxiety rises. The big question arises: Is it wise to continue investing in ETFs during a crisis, or does this increase your risk? This article analyzes how a recession impacts ETFs and how to invest wisely during uncertain times.

Image illustrating a person wondering if he or she should invest during a crisis

What are ETFs?

ETF stands for Exchange-Traded Fund, a type of investment fund that tracks the performance of an underlying index, sector, or asset class. ETFs are popular among investors because of their simplicity and low-cost structure. Key Characteristics of ETFs are

To know more about ETFs, read our article "ETF: everything you need to know to invest better".

How do ETFs react during a crisis or recession?

Financial crises or recessions often lead to sharp declines in the markets. Since ETFs track indices, they are not immune to these downturns. Typical ETF Behavior in turbulent times can be: 

Why ETFs can still be valuable in a crisis

Investing in ETFs during a crisis doesn’t have to be reckless. For long-term investors, crises often present a buying opportunity.

  1. Long-term focus
    Historically, markets have always recovered from crises. Major indices like the S&P 500 have rebounded time and again—often within a few years. Investing or staying invested during a downturn allows you to take advantage of lower prices. This is known as contrarian investing—buying when others are panicking.
  2. Diversification as a shield
    ETFs are ideal for spreading risk across:
    • Sectors: Technology, healthcare, energy, etc.
    • Regions: U.S., Europe, emerging markets
    • Market Caps: Large, mid, and small-cap companies
    In a crisis, some sectors suffer more than others. A well-diversified ETF minimizes exposure to sector-specific crashes (e.g., real estate in 2008 or tech in 2000).
  3. Invest gradually using DCA
    Dollar Cost Averaging (DCA) is a strategy where you invest a fixed amount at regular intervals (e.g., monthly). This reduces the risk of investing everything at a market peak. Sometimes you buy high, sometimes low—but on average, you get a fair price.

    DCA benefits:

    • Reduces emotional decisions
    • Creates investment discipline
    • Makes investing accessible, even with small amounts

Risks of ETF investing during a crisis

While ETFs are reliable instruments, market risks persist. Understanding these risks helps you manage them effectively.

  1. Temporary losses
    It’s not uncommon for a global ETF to drop temporarily 20% or more during a severe crisis. These losses are only on paper, unless you sell. Selling at a low locks in losses and prevents you from participating in the recovery. Key Principle: Losses are temporary—if you stay invested.
  2. Emotional pressure and impulse reactions
    Even seasoned investors can lose sleep over falling portfolios. Human brains are wired for loss aversion, losses feel more painful than equivalent gains feel good. Avoid the following behavioral pitfalls during crises:
    • Panic selling
    • Shifting to “safe” assets at the wrong time
    • Waiting endlessly for the “perfect” moment that never arrives
    Having a professional advisor helps you stay rational. Easyvest relies on model portfolios based on long-term statistics, not emotion.
  3. Be cautious with niche ETFs
    Sector or “thematic” ETFs (e.g., AI, blockchain, biotech) can be hit harder during crises. They lack the diversification of broader ETFs and often have lower liquidity.

    To invest in ETFs during a crisis, favor globally diversified and liquid funds.

How to invest wisely in ETFs during a crisis or recession

A solid plan shields you from panic and helps avoid costly long-term mistakes.

  1. Choose broad market ETFs
    Consider ETFs like:
    • MSCI World: Exposure to 1,600+ global companies
    • S&P 500: The 500 largest U.S. companies
    • Vanguard FTSE All-World: Broad exposure, including emerging markets
    These ETFs provide a strong foundation, even in volatile times.
  2. Automate your investments
    Platforms like Easyvest offer automated monthly investments. This removes the temptation to time the market and facilitates DCA. Just set your investment amount, then the system handles the rest, even during market crashes.
  3. Align with your risk profile
    Crises are a good time to review your portfolio:
    • Are you overexposed to risk for your age or goals?
    • Can you handle a 30% loss without panicking?
    • Would a more defensive approach bring peace of mind?
    Revisiting your strategy brings clarity during chaos.
  4. Stay in the market
    Investing is a marathon, not a sprint. Exiting during a downturn is rarely wise. Statistics show that those who temporarily exit often miss the market’s best days—hurting long-term returns.

    Strategy Comparison Table:

    StrategyRiskPotential BenefitBest For
    Lump-Sum InvestmentHighMax gains during recoveryExperienced investors
    Dollar Cost AveragingModerateAverage entry pricesBeginners or cautious investors
    Fully Exiting MarketHighTemporary calm, but riskyNot recommended
    Buy & HoldVolatileHistorically high returnsLong-term investors

What history tells us

History shows that markets rebound. Major indices have weathered many crises—and emerged stronger.

Examples:

Bottom line: Crises pass. Patient investors are almost always rewarded.

Practical tips for investing in uincertain times

Conclusion: ETF investing during a crisis? It can be smart, with the right plan

Investing in ETFs during a recession or market crash involves risks, but also offers opportunities. By staying focused on the long term, investing broadly, and eliminating emotion through a disciplined approach like DCA, you can emerge stronger from a downturn.

The key? Don’t run from the markets. Keep investing with discipline, knowledge, and, if needed, professional guidance.

Want to learn how Easyvest can help you navigate economic uncertainty?
Discover our approach to investing with discipline and objectivity, even in the toughest market conditions.

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Easyvest is a brand of Easyvest NV/SA (No. 0631.809.696), authorized and regulated by the Belgian Authority for Financial Services and Markets (FSMA) as a portfolio management company and as a broker in insurances, with registered office at Avenue Louise 475, 1050 Brussels, Belgium. Easyvest Pension Fund (abbreviated to Easyvest OFP) is a professional pension organisation approved by the FSMA (No. 1011.041.490) and domiciled at the same address. Copyright 2025 EASYVEST NV/SA. Past performance is no guarantee of future results. Any historical returns, expected returns, or probability projections may not reflect actual future performance. All securities involve risk and may result in loss.