Market crashes are among the most emotionally challenging periods for investors. Sharp declines in indices, negative headlines, and falling portfolio values often trigger fear and panic. During such times, a common question arises:
“Should I continue my SIP during a market crash, or stop investing until markets recover?”
The short answer for most long-term investors is yes—continuing your SIP during a market crash is usually the right decision. This article explains why, how SIPs behave during market downturns, when caution is needed, and how investors should think rationally during turbulent times.
What Happens During a Market Crash?
A market crash is characterized by:
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Sharp and rapid price declines
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High volatility
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Negative investor sentiment
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Short-term uncertainty
Crashes can be triggered by:
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Economic recessions
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Global crises
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Financial system stress
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Policy shocks or geopolitical events
While crashes feel extreme in the moment, history shows that markets are cyclical and recover over time.
How SIPs Work During Market Crashes
A Systematic Investment Plan (SIP) invests a fixed amount at regular intervals regardless of market conditions.
During a market crash:
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NAVs fall
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SIPs buy more units with the same amount
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Average cost per unit declines
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Future recovery amplifies gains
This mechanism is known as rupee cost averaging, and it becomes most powerful during prolonged market declines.
Why Continuing SIPs During a Crash Makes Sense
1. You Accumulate More Units at Lower Prices
Market crashes reduce asset prices. Continuing SIPs allows you to accumulate a larger number of units, which significantly boosts long-term returns when markets recover.
Stopping SIPs means missing the “cheap units” phase.
2. SIPs Are Designed for Volatility
SIPs are not meant for stable markets—they are designed to work because markets fluctuate.
Volatility:
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Reduces average cost
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Improves long-term compounding
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Rewards patience
Avoiding SIPs during volatility defeats their core purpose.
3. Market Timing Is Extremely Difficult
Waiting for the “right time” to restart SIPs assumes you can accurately predict:
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When the bottom will occur
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When the recovery will begin
Most investors miss the best recovery phases by staying out too long. SIPs remove this guesswork completely.
4. Long-Term Goals Remain Unchanged
If your SIP is for:
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Retirement
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Children’s education
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Wealth creation
And your goal is 7–15 years away, a market crash today has little relevance to the final outcome—except that it may actually improve it.
5. Emotional Decisions Hurt Returns
Many investors who stop SIPs during crashes:
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Restart only after markets recover
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Buy at higher prices
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Reduce overall returns
Successful SIP investing requires emotional discipline, not emotional reaction.
What History Teaches About SIPs During Crashes
Past market crashes have shown that:
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Markets eventually recover
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Investors who stayed invested benefited the most
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SIPs started or continued during crashes often delivered superior long-term returns
Crashes are temporary; compounding is permanent.
Common Fears That Lead Investors to Stop SIPs
“My portfolio value is falling every month”
This is normal during crashes. Short-term portfolio value is not a measure of SIP success.
“What if the market falls further?”
Even if markets fall further, continued SIPs only improve cost averaging.
“I should wait until things stabilize”
By the time stability is visible, markets may already have moved up significantly.
When Should You Reconsider or Modify SIPs?
While continuing SIPs is generally recommended, there are exceptions.
Valid Reasons to Pause or Adjust SIPs
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Loss of income or cash flow stress
Financial stability comes first. -
No emergency fund
SIPs should never replace emergency savings. -
Short-term goals (1–3 years away)
Equity SIPs may not be suitable for near-term needs. -
Incorrect fund selection
Sectoral or thematic funds may need review during prolonged downturns.
In such cases, reducing or reallocating SIPs is wiser than stopping investing altogether.
Better Alternatives Than Stopping SIPs
If you feel uncomfortable continuing at the same level, consider:
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Reducing SIP amount temporarily
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Redirecting SIPs to diversified equity or hybrid funds
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Continuing core SIPs and pausing only high-risk ones
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Switching to step-up SIP later instead of stopping now
Flexibility is better than complete withdrawal.
SIP During Crash vs SIP During Bull Market
| Aspect | Market Crash | Bull Market |
|---|---|---|
| Units accumulated | Higher | Lower |
| Average cost | Lower | Higher |
| Emotional comfort | Low | High |
| Long-term benefit | Very High | Moderate |
Ironically, the most uncomfortable times often offer the best long-term opportunities.
Role of SIPs in Investor Psychology
SIPs help investors:
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Avoid panic selling
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Stay disciplined
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Focus on process over outcomes
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Reduce regret from wrong timing decisions
They turn volatility from a threat into an advantage.
What Experienced Investors Do During Crashes
Seasoned investors often:
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Continue SIPs without interruption
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Increase SIP amounts if cash flow allows
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Avoid checking portfolios too frequently
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Focus on long-term fundamentals
They treat crashes as accumulation phases, not exit signals.
SIPs and Long-Term Wealth Creation
Wealth through SIPs is built by:
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Consistency
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Time
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Discipline
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Compounding
Market crashes are not obstacles—they are accelerators for long-term investors who stay invested.
Final Answer: Should You Continue SIP During a Market Crash?
Yes, in most cases you should continue your SIP during a market crash, especially if:
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Your goals are long-term
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You have stable income
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You have an emergency fund
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You invested with the right risk profile
Stopping SIPs during crashes often leads to poorer outcomes than staying invested.
Final Thoughts
Market crashes test investor patience, not investment logic. SIPs reward those who remain disciplined when emotions are high and confidence is low. While it feels uncomfortable to invest during falling markets, this is precisely when SIPs work most effectively.
The key to SIP success is not avoiding crashes—but investing through them.
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