Time after time, investors have seen the same scenario play out. A crisis arises, and stocks sell off hard. Things look bad. There doesn't seem to be any bottom in sight.

Then, all of a sudden, the market starts to rebound. It seems too good to be true, as the situation outside the financial markets still looks sketchy at best. Yet stocks keep rising and rising. Before you know it, a new bull market has started.

That's what's happened so far in 2020, and it's a playbook that experienced investors have seen countless times before. Yet even with all that experience, many of those seasoned investors didn't pull the trigger to buy more stocks when the market was plunging. A lot of them are kicking themselves right now, because once again, they've missed out on a golden opportunity to make what could be some of the most lucrative investments of their careers.

Person looking at wall-screen with lots of down-pointing arrows and charts.

Image source: Getty Images.

But if you're angry at yourself for missing out on the March lows, cut yourself some slack. There are very good reasons why it's so hard to buy stocks during market crashes. Here are two of the biggest.

1. It always feels different this time

It's easy to say that the next time the stock market crashes for no apparent reason, you'll be the first to take your cash and buy stocks on the cheap. But when the crash actually comes, the reason behind it always seems to be new. The bearish arguments for what the future will bring seem extremely compelling.

During the financial crisis in 2008 and 2009, there was a very real chance that the global financial system would collapse. It took extraordinary effort to keep it afloat. Those who took the chance and invested optimistically got rewarded, but to say that it was a sure thing is to let hindsight cloud what it was actually like during the crisis.

This year, the pandemic has led to similarly unprecedented actions, including the suspension of nearly all business activity for months. Tens of millions are unemployed. A market crash seemed warranted, and the magnitude of the decline reflected how much concern there was. Now, risk-tolerant investors have once again identified that it's likely that things will work out and that the drop was exaggerated. However, there's still no certainty that the pandemic won't get worse, and that's kept many people on the sidelines during the ensuing rally.

If you're going to buy during a market crash, you have to be willing to invest when it feels like the absolutely worst idea in the world. Don't expect to build a mindset where you're comfortable or even eager to buy into crashes. That's a rarity -- and it's why there are so many truly great investors out there.

2. You'll settle for nothing short of perfect timing

Even if you have the discipline to buy stocks when the market drops, the odds of your picking the absolute bottom are nearly zero. What's more likely is one of the following outcomes:

  • You'll identify bargains when the market is down 5% or 10%, and use up all your available cash just in time to see stocks drop another 10% or 20%.
  • You'll wait until the market stops falling, and then when share prices start to jump, you'll nitpick over whether you should really pay 5% or 10% more than you would've paid if you'd just picked the day of the market lows to buy. Then, the stock will rise another 10% or 20% while you sit shaking your head.

One strategy to avoid this problem is to buy partial positions rather than investing all at once. You might invest a portion when the market's down 5%, another when it's down 10%, and a bigger part when it's down 20% or 25%. Even then, you'll sometimes invest all your money before the market hits bottom. But when the market recovers, you'll see some of those positions turn profitable early on in the rally. You also run the risk of not investing all your cash at bargain prices if the market turns out not to fall that far, but that at least leaves you with opportunities to capitalize on future downturns.

The best way to keep investing during a market crash

Knowing that these influences are out there is helpful. But even knowing them won't make it any easier to pull the trigger in the next market crash.

Perhaps the easiest way to avoid having to worry too much about investing during crashes is simply to have an automatic investment program. If you take the same amount of money month after month and put it to work in the stock market, then you'll end up buying more shares of stocks or ETFs  in the months when the market has dropped. That'll give you an edge -- and if it's automatic, you won't even have to think about it.

Taking advantage of market crashes is harder than it looks. Rather than responding emotionally, you have to find a way to overcome anxiety and make the choices that seem so obvious when markets aren't under stress. Do whatever it takes to put yourself in that rational state, and you'll see your long-term results improve.