Picking an index fund and setting up a monthly transfer takes fifteen minutes. Sitting still when that same savings pot has lost a third of its value and the evening news is talking about a crash, that is the entire job. I think savings guides cheat a little by only describing the easy part, so this guide is exclusively about the hard part.
Market falls are not the exception, they are part of the return: they are what you pay to get equity returns instead of a savings account. Historically, broad falls of thirty, forty and even fifty-seven per cent have always been followed by new highs, though it has sometimes taken years. Your only job during a fall is to not sell, to keep buying monthly, and possibly to rebalance back to your chosen split. And rebalance inside an ISK or a kapitalförsäkring if you can, where the trade triggers no tax at all.
I go through what historical falls actually did, how Swedish savers behaved in 2020 and 2022, the truth behind that claim about the best days in the market, how rebalancing works and why tax decides the way you should handle it. If you want to see the falls with your own numbers, run the backtest tool.
What history actually shows
First a technicality that decides whether any figure about the Stockholm exchange is true or misleading: OMXS30 is a price index and ignores dividends, while SIXRX includes them. The difference is several percentage points a year, and anyone comparing a fall in the price index with their own fund portfolio always overstates the damage. I state which measure applies every time below.
The financial crisis is the worst modern example: OMXS30 fell 57.8 per cent from its peak on 13 July 2007 to the bottom on 27 October 2008, so over roughly fifteen months. Measured with dividends, 2008 was a fall of 39.3 per cent for SIXRX, and the following year the same index rose 52.7 per cent. During the dot-com bust SIXRX fell 35.9 per cent in 2002, and in 2003 it rose 47.4 per cent. The pattern repeats: the deepest darkness sits immediately before the sharpest rise, which is exactly why stepping off at the bottom is so expensive.
2020 is the most instructive case, because it was both brutal and short. At its lowest, OMXS30 was nearly 29 per cent below the start of the year on 16 March 2020. Anyone who sold then locked in the disaster. Anyone who did nothing ended the year up: OMXS30 rose 5.8 per cent over the full year and SIXRX, with dividends, a full 14.8 per cent. The entire crash and the entire recovery fitted inside one calendar year. 2022 was the opposite, a slow grind through the whole year: OMXS30 finished down 18.4 per cent and SIXRX down 22.8 per cent.
Zoom out properly and Swedish equities have delivered around 6 per cent a year in real terms, meaning after inflation and with dividends reinvested, measured over more than 150 years. But that figure is an average, not a promise: the 1910s, the 1930s and the 1970s all delivered negative real returns across an entire decade. Anyone with a ten-year horizon should know that. Anyone with thirty years need barely worry about it.
What Swedish savers actually did
This is the most useful statistic in the whole guide, I think, because it is about behaviour rather than indices. Fondbolagens förening measures net flows every month, and the two most recent big falls produced completely different answers.
In March 2020, Swedes sold. Net withdrawals from funds came to just over 11 billion kronor, with equity funds losing 19.3 billion, while money flowed into bond funds. That happened, in effect, at the same time as the bottom on 16 March. Then it turned: new saving was already strong again in April, and the full year 2020 ended with positive net saving and record fund assets. So a great many savers managed both to sell cheap and to buy back more expensively, which is the only reliable way to lose money in a rising market.
In 2022 we did the opposite. Despite a full year of falling prices, net saving was positive, around 19 billion kronor, and equity funds saw net inflows. At the same time, 19 billion is well below the average of around 79 billion a year since 2000, so saving slowed sharply without turning into selling. The conclusion is striking: the fast crash triggered panic, the slow decline did not. That is worth knowing about yourself before the next sudden fall, because that is when the brain is at its worst at making decisions.
The truth about the best days in the market
You have surely seen the chart: had you missed the ten best days in the market since 1990, your return would have halved. It is popular in fund marketing, and the numbers themselves are right. But the argument is almost always presented dishonestly, so let me give you the whole picture.
What is never shown is the mirror calculation. Had you instead missed the 25 worst days, you would have ended up with considerably more money than by simply sitting still, and that gain is larger than what the best days were worth. Miss both the best and the worst days and you land roughly where an ordinary long-term saver lands. Market timing is not forbidden by the laws of nature; it is simply impossible in practice.
And that is where the real argument lives: the best and the worst days arrive in a cluster, in the middle of the crash. Across eight trading days in March 2020, between the 9th and the 18th, three of the thirty best days and five of the thirty worst days occurred. They are interleaved. You cannot remove the bad ones and keep the good ones, because they come in the same week and you only know which was which afterwards. The conclusion is not that you should fear missing the upswing, but that the two kinds of day cannot be separated. That is why you stay put.
Rebalancing: the only button you should press
If you have settled on, say, 80 per cent equities and 20 per cent bonds, a market fall will move you, perhaps to 70/30. Rebalancing means selling what has done best and buying what has done worst until you are back at 80/20. It feels wrong every single time, which is precisely the point: it forces you to buy cheap.
Be honest about why you do it. The research shows that rebalancing mainly controls the risk in the portfolio, meaning it keeps it at the risk level you chose, and that the extra return is small. Vanguard has measured the value of threshold-based rebalancing at roughly 15 to 25 basis points a year, a fraction of a per cent. It is a risk button, not a return machine. Skip rebalancing through a long rise and you drift imperceptibly toward a far more aggressive portfolio than you chose, and the next fall will then hurt considerably more than you bargained for.
How often? Vanguard recommends checking once or twice a year and adjusting when an asset class has drifted more than 5 percentage points from target. The most important finding in that research is a different one, though: quite different strategies worked about equally well at controlling risk. So pick a rule and stick to it rather than fine-tuning it. Run your own split through the rebalancing tool.
Tax decides how you rebalance
This is the Swedish piece that almost every international guide misses, and it changes the advice completely depending on your account type. In an ISK or a kapitalförsäkring, individual trades are not taxed. You pay a flat tax on the capital whether you trade or not, which means you can buy and sell as much as you like without triggering a single krona of tax. Rebalancing there is entirely free, apart from any brokerage fee.
In an ordinary taxable account it is the reverse. Every sale realises a gain taxed at 30 per cent as investment income. Rebalancing then costs real money immediately, and that money also stops compounding for you. The tax system therefore rewards rebalancing in an ISK and penalises it in a taxable account.
In practice that means two different behaviours. If you hold an ISK: rebalance with 5 percentage point bands, without hesitating. If you hold a taxable account: use wider bands, and rebalance primarily with new contributions, meaning you steer the monthly transfer toward whichever asset sits below target instead of selling anything. You get the same effect without the tax hit. If you hold both: do the whole rebalance inside the ISK and leave the taxable account alone.
If you are about to live off the money
All of the above assumes you are saving. If you are close to retirement or FIRE, the game changes, and it matters more than most people realise. The risk is called sequence risk: a fall early in the withdrawal phase does far more damage than exactly the same fall later, because you are selling units at bottom prices to pay the rent and those units never come back when the market turns. Wade Pfau's research suggests the returns of the first ten years of retirement explain around 77 per cent of how it eventually turns out.
The countermeasures are simple and dull: hold a couple of years of spending in something that does not swing, be prepared to cut withdrawals temporarily in a bad year, and reduce the equity share somewhat in the years right around the transition. Test how your plan copes with a bad start in the scenario tool before you need to know for real.
My take
I do not believe anyone gets through a market fall on willpower. What you get through it on are decisions you made in advance, while calm. So make the three decisions now: settle your split between equities and bonds and write down why, put the monthly saving on autogiro so the buying continues without you having to want it, and decide your rebalancing rule. Then do not look at the portfolio more often than the split requires. A global index holding that is left alone will pass through several falls that feel like the end of the world, and they will show up afterwards as small notches in the chart. The dullest advice in investing is still the one that works best: do nothing, keep buying.