Investment stress test: could you hold through a 30% or 57% fall?
A stress test does not predict that markets will fall. It assumes the worst case happens, and shows what your money would look like and whether you could hold.
Do it before a fall, because in a panic people decide badly.
Three steps
- Enter the amount you plan to invest.
- Pick a historical fall as the scenario.
- Compare with the loss limit you wrote: could you sleep at that point? If not, reduce the amount and test again.
Historical scenarios (used in the junjun.life stress test, approximate)
- S&P 500: dot-com bust (2000–02), about −49%
- S&P 500: financial crisis (2007–09), about −57%
- S&P 500: COVID crash (2020), about −34%
- S&P 500: rate shock (2022), about −25%
- These are price-index scenarios for illustration, not forecasts.
Why do it in advance
In a real fall you see your actual money shrink, and emotion pushes you to sell. A stress test lets you decide, while calm, what you can take, and write the rule down.
FAQ
Does a stress test predict my loss?
No. It uses historical falls as scenarios against your amount and limit. It is not a forecast.
How often should I do it?
Before you start, when your amount changes materially, and at each review day.
Is this investment advice?
No. For education only, not investment advice.
Looking for ideas to check with HOLD?
Arrie HK StockScreener screens Hong Kong main-board stocks every night. It only generates ideas and is not a buy recommendation. Before acting on one, check it with a HOLD plan, a stress test and an exit plan.
Open Arrie StockScreener ↗A separate tool on another site.
Keep reading
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