What to Do When the Stock Market Crashes
Market crashes feel scary, but your reaction matters more than the fall itself. Here’s how long-term investors handle them.
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Sharp market falls are a normal, recurring part of investing — not a sign the system is broken. What separates investors who do well from those who don’t is usually behaviour, not prediction.
1. Don’t panic-sell
Selling after a fall locks in losses and risks missing the recovery, which often comes when sentiment is still negative. Loss aversion and herd behaviour push people to sell at the bottom — recognise the urge and pause.
2. Keep your SIPs running
A crash means your SIP buys more units at lower prices — rupee cost averaging works best precisely in down markets. Stopping a SIP in a dip is the opposite of “buy low”.
3. Revisit your asset allocation
A crash is a good time to check your asset allocation and rebalance — topping up equity from debt if your plan calls for it. Only do this with money you won’t need soon.
4. Focus on what you control
- Your emergency fund — so you never have to sell in a crash.
- Your costs and your contribution rate.
- Your time horizon — long horizons ride out downturns.
Crashes are the “cost of admission” for the long-term returns equities offer. Stay invested, keep contributing, and let time work.
