3 Investments That Have Performed Best During Every Major Collapse
This article is an opinion and meant to expand your perspective.
I do advise you not to make a final decision based on it only!
When a financial collapse occurs, most people believe
the safest strategy is to hold cash, stay diversified, and wait it out.
This instinct is exactly wrong.
During every major crash in the last 100 years—including
1929, 1973, 2000, 2008, and 2020—three specific investments
dominated while everything else burned.
These investments act as crisis killers,
functioning exactly when the system deteriorates.
1. Long-Dated US Government Bonds
When markets crash, the natural instinct is
to sell everything and flee to cash.
The idea of buying 30-year government bonds during
a crisis feels counterintuitive
because you are locking money into a government promise
while the system struggles.
However, during the 2008 financial crisis, the S&P 500 fell 57%,
but long-dated treasury bond ETFs went up roughly 25%.
During the deflationary depression of 1929 to 1932, stocks fell 89%,
yet long-dated US government bonds delivered positive returns.
The mechanism behind this is simple math.
When a financial panic hits:
- Investors flee risky assets like stocks and corporate bonds.
- Central banks slash interest rates to inject liquidity into the frozen system.
- When interest rates fall, bond prices rise.
Long-dated bonds (like 30-year bonds) are highly sensitive
to rate changes, amplifying the price move.
Furthermore, long-dated treasuries serve as the ultimate hedge
because terrified capital instinctively flocks to the safety
of the world’s reserve currency.
However, this strategy only works in deflationary panics
(like 2008 or 1929) where credit freezes and prices fall,
not during periods of stagflation or hyperinflation.
2. Gold (As Monetary Insurance)
The surface-level story that gold is a “safe haven”
is catastrophically incomplete.
Critics like Warren Buffett correctly point out that
gold produces nothing, pays no dividends, and has no earnings.
What they miss is its function: gold is not a traditional investment;
it is monetary insurance.
You buy it not to get richer in normal times,
but to prevent total annihilation in abnormal ones.
During the Weimar hyperinflation of 1923,
the paper mark fell to one trillionth of its value.
Traditional paper savings, bonds, and life insurance policies
became mathematically worthless.
However, a single gold mark retained 100% of its purchasing power.
During the Great Depression,
FDR required Americans to surrender their gold before
immediately devaluing the dollar against gold by 69% overnight.
The government confiscated gold precisely
because it was the only asset that worked to protect citizens
from monetary debasement.
When a crisis hits, central banks expand the money supply,
diluting the purchasing power of paper currency.
Gold, however, cannot be printed.
Because the supply of gold grows at a slow,
predictable rate of about 1.5% per year,
the mathematics of scarcity automatically protects your
purchasing power when institutional credibility collapses.
3. Tail Risk Hedges
Tail risk hedging involves buying out-of-the-money put
options on equity markets—contracts that pay off enormously
when markets crash hard and fast.
In normal, rising markets, these options expire worthless month
after month, meaning they slowly bleed capital.
Understanding why this is valuable requires
abandoning traditional portfolio theory,
which incorrectly treats gains and losses as symmetrical.
In reality, a 50% loss requires a 100% gain just to break even.
Tail risk hedges are fundamentally “antifragile,”
meaning they are designed to benefit from extreme disorder.
If you allocate a tiny percentage of your portfolio to a tail hedge,
it acts as cheap insurance.
In the event of a catastrophic market crash,
that small allocation multiplies exponentially,
offsetting massive losses in the rest of your portfolio.
By preventing catastrophic drawdowns,
a tail hedge preserves the compounding engine
of your investments.
Holding tail risk hedges is psychologically difficult
because they lose money steadily during long periods
of historical calm.
However, every major financial collapse is preceded
by periods of historically low volatility.
Investors who succeed during crises are the ones with the discipline
to maintain their hedges—buying the insurance before the storm hits,
not during it.
