What to do when the market crashes: Continue SIP or stop?
Summary
When markets crash, most investors panic and stop their SIPs. But continuing your SIP during market downturns is usually the smarter move. Falling markets let you buy more units at lower prices through rupee cost averaging. Over time, this reduces your average cost and boosts returns when recovery happens. Stopping SIPs breaks discipline, interrupts compounding, and often leads to emotional investing. Unless you face a genuine financial emergency, keep your SIPs running. Market crashes are temporary. Compounding needs time and consistency. Stay invested, stay calm, and let time do the heavy lifting.
Introduction
Your portfolio shows red. Yesterday it was down 5%. Today, another 3%. The news channels scream crisis.
In such a scenario, what will be your first instinct? "Maybe I should stop my SIPs until things get better."
This reaction feels logical. Markets are falling. Why keep investing when everything's declining?
Market downturns trigger panic in even experienced investors. Watching your hard-earned money shrink overnight creates real stress. The urge to "do something" becomes overwhelming.
But here's the uncomfortable truth. This instinct often costs you more than the crash itself. By the time things "feel safe" again, markets often recover, and the buying opportunity is gone.
Continuing your SIP during crashes feels counterintuitive. It goes against every protective instinct. But, yet it's often the smartest financial decision you can make.
Let's break down why stopping might hurt you. And why continuing usually helps.
Understanding SIP: The System That Works Best in Market Volatility
A Systematic Investment Plan isn't complicated to understand. You invest a fixed amount monthly. ₹5,000 every month. Or ₹10,000. Or whatever amount you've committed to.
Staying consistent with this approach if the market is down? You get the opportunity to buy more units. This automatic adjustment is the entire point.
The Math During Market Swings
Let's say your SIP amount is ₹10,000 monthly. Fund NAV is ₹100. You buy 100 units.
Next month, the market crashes. NAV drops to ₹80. Your ₹10,000 now buys 125 units.
Month after, further decline. NAV goes down to ₹70. You get 143 units.
You haven't changed your investment. But you're accumulating more units at lower prices.
The figures/projections are for illustrative purposes only. The situations/results may or may not materialise in future. Mutual Fund investments are subject to market risk, Read all scheme related documents carefully. Past performance may or may not be sustained in future and is not a guarantee of any future returns.
Rupee Cost Averaging in Action
This isn't a complex strategy. It's simple arithmetic working in your favour. Your average cost per unit keeps reducing as markets fall. When recovery happens, these accumulated units multiply your returns. You didn't time the market. You didn't predict the bottom. You just kept investing consistently.
That consistency does the heavy lifting.
Why Discipline Beats Intelligence Here?
Smart investors try timing the market. They wait for the "right moment" to invest. But no one can consistently identify market bottoms. Not fund managers. Not analysts. Nobody.
SIP removes this guessing game entirely. You invest regardless of conditions. The mechanism handles optimisation automatically.
Why Stopping Your SIP Might Hurt You?
Markets crash. Prices drop significantly. Everything feels cheaper. This is exactly when you should be buying more, not stopping. Think about it differently.
If mangoes usually cost ₹200/kg and suddenly drop to ₹100/kg, do you stop buying? Or buy more?
Yet with investments, people do the opposite. Prices fall. They stop buying. This reversal of logical behaviour costs dearly.
Recovery Happens Faster Than Expected
Historical pattern repeats consistently. Markets crash dramatically. Then recover, often quickly.
The sharpest recovery usually occurs during the early phase of recovery. By the time investors pause, wait, and then decide to restart their SIPs, the market has often already rebounded — you've missed the buying opportunity.
Breaking the Investment Habit
SIP works because it's automatic. You don't think about it monthly. The amount just gets invested. If you stop during panic. The discipline breaks. Restarting becomes harder psychologically. Soon you're not doing SIP anymore. You're doing irregular investments based on emotions.
The Emotional Decision Trap
Stopping SIP during crashes is always an emotional decision. Never a logical one. Fear drives it and panic justifies it. But neither fear nor panic builds wealth.
The investors who build substantial corpus over decades share one trait. They didn't stop during crashes. Not because they weren't scared. They were. They just didn't act on that fear.
Benefits of Continuing Your SIP in a Market Crash
Look at any long-term market chart. Multiple crashes are visible. 2008 financial crisis. 2020 pandemic crash. Various corrections in between. Every single time, markets recovered. Often reaching new highs within a few years.
Disclaimer: Past performance may or may not be sustained in future and is not a guarantee of any future returns.
Investors who continued their SIPs through these crashes accumulated units at depressed prices. Their returns amplified during recovery.
Those who stopped? They bought fewer units overall. Their recovery gains stayed limited.
Compounding Needs Continuous Fuel
Compounding works excellently over long periods without interruption. Every year's returns become next year's base. And if you think of stopping your SIP or redeeming your investments, you've lost compounding. Not just on new investments, but on potential returns those investments could have generated.
This lost time never comes back. You can't compensate later by investing double. Time in the market beats timing the market. It's a mathematical reality.
How Volatility Actually Helps You?
Volatility often gets a bad name — but for long-term SIP investors, it can actually work to your advantage. Let’s understand this with an example.
Consider two scenarios. Both start and end at the same NAV of ₹100 over one year.
Scenario 1: Low volatility
NAV moves steadily: ₹100 → ₹102 → ₹103 → ₹102 → ₹101 → ₹99 → ₹98 → ₹99 → ₹100 → ₹101 → ₹102 → ₹100
You invest ₹10,000 every month. Because prices don’t fluctuate much, your SIP buys roughly the same number of units each time. Total units accumulated: approximately 1,200.
Scenario 2: High volatility
NAV fluctuates sharply : ₹100 → ₹105 → ₹110 → ₹95 → ₹85 → ₹75 → ₹70 → ₹80 → ₹90 → ₹95 → ₹98 → ₹100
Here too, you invest ₹10,000 monthly. But when the NAV dips to ₹70–₹85, your SIP buys more units — automatically taking advantage of lower prices.
Total units accumulated: approximately 1330 units. Both scenarios end with the same NAV of ₹100 — yet, in the volatile one, you own 10.19% more units.
Now imagine NAV eventually rises to ₹120 or ₹150, those extra units multiply your returns substantially. So for disciplined SIP investors, volatility isn’t an enemy — it’s an ally that quietly builds wealth in the background.
The figures/projections are for illustrative purposes only. The situations/results may or may not materialise in future. Mutual Fund investments are subject to market risk, Read all scheme related documents carefully. Past performance may or may not be sustained in future and is not a guarantee of any future returns.
The Real Wealth Builder
Investors who built ₹1 crore+ portfolios through SIPs didn't get there during stable markets. They got there by continuing through multiple crashes. Each crash gave them more units at lower prices. Each recovery amplified their gains. They weren't more intelligent. They were just more consistent.
When Stopping Might Actually Make Sense
Medical emergency requiring immediate cash. Unavoidable major expense. These situations warrant pausing SIP temporarily. Financial survival comes first. But this should be rare. If you're stopping SIPs frequently due to cash crunches, your emergency fund needs building.
But if there is no fundamental shift. Your job is secure. Your income continues. Your financial situation hasn't changed. Then your SIP shouldn't change either. You can consider SIP top-up if you see a positive shift, like income growth, to build more wealth in your investment horizon.
Remember, the market situation isn't a valid reason to stop. It's actually the reason to continue.
Practical Tips for Investors During Market Crashes
Manage Your Mind First
Your portfolio will recover. Your panic might not. Guard against emotional decisions.
Avoid checking portfolio values daily during crashes. Nothing productive comes from it. Keep your focus on financial needs and long term.
Review, Don't React
Portfolio review is healthy. Panic-driven redemption isn't. Know the difference. Ask yourself: Has my financial situation changed? Has my time horizon shortened? Has the fund fundamentally deteriorated? If answers are no, no, and no, continue as thought. If you think that something has fundamentally changed, consider taking guidance from your dedicated mutual fund distributor.
Diversification Reduces Drama
If your entire portfolio is in one sector or a few funds, volatility hits harder. Take the guidance of a mutual fund distributor to assess your risk profile and spread your money across market caps, sectors, and asset types. Crashes affect different segments differently. When one area falls sharply, others might hold steadier. Your overall portfolio volatility reduces.
Talk to Your Distributor
Feeling uncertain is normal during crashes. You're not expected to navigate everything alone.
Your mutual fund distributor has seen multiple market cycles. They can provide the perspective your panic obscures. But approach them for clarity, not validation of your fear. "Should I stop my SIP?" is fear talking.
"Help me understand what's happening and confirm my approach still makes sense" is clarity seeking.
Conclusion
Market crashes are temporary discomfort. Stopping SIPs creates permanent damage. Your instinct will scream to stop. Your logic should whisper to continue. Disciplined investing isn't about never feeling fear. It's about not acting on that fear.
Every market crash feels like "this time is different." It never is. Markets fall. Markets recover. This pattern repeats. The investors who build substantial wealth simply refuse to interrupt their investing process through crashes, corrections, bear markets, and panic.
They feel the same fear you do. They just don't let it change their behaviour.
So, continue your SIP. Let rupee cost averaging work. Let compounding accumulate. Your future self will thank you for the units you bought at depressed prices. But only if you actually buy them.
FAQ’s
1) Should you continue SIP during a market crash?
Yes. A crash lets you buy more units at lower prices. Your average cost falls, and when markets recover, your gains multiply. Stopping SIP breaks compounding and costs long-term growth.
2) Are mutual funds safe if the market crashes?
Market crashes affect all investments temporarily — mutual funds included. They are managed by professionals, diversified across sectors, and designed for long-term objectives. If you stay invested, markets recover, and your mutual funds usually regain value.
3) Should I stop SIP when the market is high?
No. You can’t predict when the market will peak or fall. SIP works best through all phases — highs and lows. Skipping during highs, breaks your investment rhythm and defeats rupee cost averaging.
4) Should I stop my SIP in a market crash in India?
No. Indian markets have crashed and recovered multiple times — 2008, 2020, etc. Each recovery built wealth for those who kept investing. Continue your SIP unless you face a genuine personal emergency.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.