Market crash simulator
What would a market fall mean for your portfolio in euros? Choose how far stocks and bonds fall and how much of your money is in stocks, and compare it with a second mix.
A worked example
With €10,000, 80% in stocks that fall 50% and 20% in bonds that fall 10%, the total drop is 42%: €4,200, leaving €5,800. With 60% in stocks the drop is 34%: €3,400, leaving €6,600. Those percentages are only an example.
How far stocks have fallen before
The tool has no historical prices, so you enter the falls yourself. For a sense of scale, these are the four times since 2000 that the S&P 500 fell more than 20% from its highest close:
| Period | Highest close | Lowest close | Fall |
|---|---|---|---|
| 2000–2002, dot-com bubble | 1,527.46 on 24 March 2000 | 776.76 on 9 October 2002 | −49.1% |
| 2007–2009, financial crisis | 1,565.15 on 9 October 2007 | 676.53 on 9 March 2009 | −56.8% |
| 2020, Covid-19 | 3,386.15 on 19 February 2020 | 2,237.40 on 23 March 2020 | −33.9% |
| 2022, inflation and rising rates | 4,796.56 on 3 January 2022 | 3,577.03 on 12 October 2022 | −25.4% |
These are figures for one American index in dollars. A world index fell by different amounts, and a euro investor also saw the dollar move against the euro. The fall from 2000 took years to recover: the dot-com bubble article shows how long.
How it calculates. The total drop is the weighted average of the fall in stocks and the fall in bonds, by the share each has in your portfolio: total drop = stock share × stock fall + bond share × bond fall. With 80% stocks falling 50% and 20% bonds falling 10%, that is 0.8 × 50% + 0.2 × 10% = 42%. The loss in euros is that percentage of your amount.
How to read the result. The result is a snapshot at the lowest point, not a loss you have to take: a fall only becomes a realised loss if you sell. Put a second mix next to it to see how much a larger bond share cushions the blow, and remember that bonds can fall too, as they did in 2022.
What it is not. The tool makes no forecast and has no recovery times: you enter the drops yourself. It is not advice on which mix suits you. Past performance is no guarantee of future results.
Where it comes from. Only the formula and your own input. The tool uses no external data and stores nothing. The table above is checked by hand against the sources named under it.
How the calculation works
The tool takes four numbers from you: the amount, the share in stocks, how far stocks fall and how far bonds fall. The bond share is whatever is left, so 100% minus the stock share. It then works in three steps. First it weighs the two falls by their shares to get one total percentage. Second, it takes that percentage of your amount, which is the loss in euros. Third, it subtracts the loss from the amount to show what remains at the lowest point. Everything is done in whole cents, and the remaining amount never goes below €0.
One line of arithmetic: €25,000 with 50% in stocks that fall 40% and 50% in bonds that fall 5%. The total fall is 0.5 × 40% + 0.5 × 5% = 22.5%. The loss is 22.5% of €25,000, which is €5,625, so €19,375 remains. To get from €19,375 back to €25,000, the portfolio has to rise by the fall divided by what is left: 22.5 ÷ 77.5 = 29.03%.
Two situations with the maths filled in
These are made-up situations with percentages chosen only for the example. They are not predictions and they are not suggestions for what to hold.
Situation 1: all in stocks, or half in bonds. Someone has €25,000 and wants to see a fall of 40% in stocks and 5% in bonds. With everything in stocks, the fall is 40%: a loss of €10,000, leaving €15,000. To get back to €25,000 that portfolio would need to rise 66.67%. With half in bonds, the fall is 22.5%: a loss of €5,625, leaving €19,375, as in the line above. The difference between the two mixes at the lowest point is €4,375.
Situation 2: two stock shares side by side. Someone has €60,000 and enters a 30% fall in stocks and an 8% fall in bonds. The tool compares two mixes:
| Mix | Total fall | Loss | Remaining |
|---|---|---|---|
| 70% stocks, 30% bonds | 23.4% | €14,040 | €45,960 |
| 40% stocks, 60% bonds | 16.8% | €10,080 | €49,920 |
The gap between the two mixes is €3,960. It follows entirely from the numbers entered: if bonds fall more, or stocks fall less, the gap shrinks or grows.
These figures are an illustration, not a forecast. Markets can fall by more or less than any percentage entered here, returns can be negative, and past performance guarantees nothing about the future.
Common mistakes when reading the result
- Reading the fall as a forecast. The percentages are scenarios you choose, not predictions of what will happen.
- Looking only at the day of the fall. The tool shows a loss in euros on one date, not how long a recovery could take, which varies a lot.
- Forgetting that your actual mix may differ. Only the shares you enter for stocks and bonds are used, not the content of any fund.
What the calculation leaves out
The tool shows a single fall at a single moment. It does not know how long a fall lasts, whether a recovery follows or how long that takes, and it has no view on when a fall might come. It leaves out money you add or take out along the way, costs, tax and the exchange rate between the dollar and the euro. It treats the stock and bond falls as the two numbers you typed, so it cannot show how a fall in one spreads to the other. After a fall, the real shares in a portfolio drift too, because the part that fell is now smaller; the tool does not model that. And it says nothing about what mix is right for you.
Questions about the market crash simulator
Why is the rise needed to recover larger than the fall?
Because the rise is applied to a smaller amount. After a 50% fall, €10,000 has become €5,000, and doubling it takes a rise of 100%, not 50%. After a 20% fall the rise needed is 25%. The formula is fall ÷ (100% − fall), and it works the same for any percentage you enter.
Which fall should I enter?
The tool does not say, and nobody can know in advance. Try several values, including some larger than you think likely, and see how the result changes. The table above shows what happened to one American index in dollars, as a sense of scale, but a different index or a different period could look very different. Whatever you enter is an assumption, not a forecast.
Does a lower amount on screen mean I have lost money?
Only if you sell at that point. The result is a snapshot of the value at the lowest point, not a recorded loss. The tool does not show what happens afterwards, so it cannot tell you whether or when the value comes back, and it gives no advice on what to do.
Further reading: