Why some investors perform better during crises than in bull markets

Periods of financial crisis have always acted as a revealer. While some investors suffer heavy losses, others manage not only to preserve their capital, but sometimes to achieve their best performances. Conversely, these same investors may appear more restrained during prolonged bull markets.

This paradox raises questions about the very nature of performance in finance and about the skills that truly matter for successful long-term investing.

Crisis as a proving ground for true investment skills

Bull markets tend to mask differences in quality between investors. When liquidity is abundant and valuations rise mechanically, many strategies deliver satisfactory results, sometimes without genuine value creation.

During a crisis, the situation is radically different. Volatility increases, correlations between assets change and analytical errors become immediately visible. It is in this context that investors endowed with rigorous discipline and a deep understanding of fundamentals stand out.

Crises impose difficult decisions, often contrary to consensus, and test the ability to manage risk rather than simply seek performance.

A risk-focused approach rather than return maximisation

Investors who succeed during crises generally give absolute priority to risk management. Unlike many actors focused on returns during bull phases, they aim to limit potential losses and preserve capital.

This approach translates into prudent allocation, measured use of leverage and genuine diversification, even in extreme scenarios. The ability to withstand a prolonged market downturn then becomes a decisive competitive advantage.

During bull markets, this prudence may on the other hand penalise relative performance, which explains why these investors sometimes appear less successful when optimism is widespread.

Patience as a structural advantage in times of stress

Patience is another key factor explaining outperformance during crises. The most resilient investors accept that value does not materialise immediately and that markets can remain irrational longer than expected.

In times of panic, this patience allows them to act where others are forced to sell. They often have available liquidity, not by chance, but because they deliberately accepted an opportunity cost during bull phases.

This ability to wait and intervene at the right moment is one of the essential drivers of performance in a crisis environment.

A contrarian reading of markets

Investors who perform well during crises often share a contrarian approach. They do not seek to precisely time the market bottom, but rather to identify assets that are durably undervalued relative to their economic fundamentals.

This stance implies strong intellectual independence. It requires the ability to oppose the dominant consensus, often marked by fear and risk aversion. Where the majority sees irreversible deterioration, these investors perceive temporary imbalances.

This ability to think against the crowd is a major asset when markets overreact to economic or financial shocks.

A deep understanding of economic cycles

Success during crises also relies on a fine understanding of economic and financial cycles. Experienced investors know that crises are not anomalies, but recurring phases of the cycle.

They adapt their strategy according to the position in the cycle, distinguishing cyclical shocks from structural breaks. This analysis allows them to avoid emotional decisions and to calibrate their investments with a realistic time horizon.

Conversely, prolonged bull markets sometimes encourage an extrapolative vision, where past growth is projected indefinitely, to the detriment of prudent risk analysis.

Psychology as a decisive performance factor

The psychological dimension plays a central role in performance during crises. Fear, media pressure and volatility exacerbate cognitive biases, even among experienced investors.

Those who succeed are often those who have developed strong emotional control. They accept volatility as a normal component of investing and avoid impulsive reactions.

This behavioural discipline is less visible during bull markets, where collective euphoria reduces risk perception, but becomes decisive when markets reverse sharply.

Why these investors seem less impressive in bull markets

The paradox lies in the fact that the qualities that protect during crises can hinder performance during bull phases. Excessive risk aversion, low exposure to the most volatile assets or high levels of cash can lead to relative underperformance when markets rise rapidly.

In an environment dominated by the search for returns, these investors may appear overly cautious, or even pessimistic. Yet this caution is precisely the source of their resilience when the cycle turns.

Performance should therefore be assessed over the entire economic cycle, rather than over an isolated period.

A key lesson for students and young investors

For a finance student or young professional, observing these profiles offers a fundamental lesson: durable investment success relies more on risk management than on the pursuit of spectacular short-term returns.

Understanding why some investors excel during crises helps develop a more mature vision of finance, less dependent on euphoric phases and more attentive to fundamentals.

In the long term, the ability to navigate crises without capital destruction is often the decisive factor of success, far more than performance achieved during bull markets.

Conclusion

Investors who perform better during crises are not necessarily those who shine when markets rise. Their strength lies in a combination of discipline, patience, risk management and understanding of cycles.

If bull markets sometimes reward risk-taking, crises remind us that finance is above all an exercise in resilience. For those who know how to approach them, they become not a threat, but an opportunity for sustainable value creation.