What You Should Do During a Stock Market Crash

Stock market crashes are intense, unpredictable, and emotionally charged. They can wipe out years of gains in a matter of days and leave even experienced investors feeling shaken. But while crashes are alarming, they're not new and they’re not the end of the world. If you’re caught in the middle of one, your reaction can make a huge difference in your long-term financial outcome.

In this article, we’ll break down what you should (and shouldn’t) do during a stock market crash to protect your portfolio and your peace of mind.

1. Don’t Panic & Stay Calm

This is easier said than done, especially when you see the red numbers flashing across your portfolio. But remember: panic leads to poor decision-making.

History shows that panic selling is one of the worst things an investor can do during a crash. In fact, some of the worst trading days are often followed by some of the best recovery days. If you sell during the plunge, you risk locking in losses and missing the rebound.

Tip: Take a deep breath, zoom out, and look at the long-term performance of the market. Crashes happen, but historically, the market always recovers.

Read More: You Should Buy Stocks Every Month

2. Avoid Making Emotional Decisions

When fear takes over, logic often takes a backseat. Emotional investing can cause you to sell low and buy high is the exact opposite of what you want.

Before making any moves, ask yourself:

• Am I reacting to short-term fear or making a strategic decision?
• Does this align with my investment plan and goals?
• What would I tell a friend in my position?

Use a rational framework, not your gut feelings, to guide your actions.

3. Review (Not Abandon) Your Investment Strategy

A stock market crash is a great time to revisit your financial goals and see if your investment strategy still aligns. If you’re a long-term investor, your portfolio should already be designed to weather downturns.

Check your asset allocation and diversification. If you're overly concentrated in one sector or type of asset (like tech stocks), now might be a good time to plan gradual rebalancing once the volatility settles.

But don’t overhaul your strategy just because of a crash. Temporary turbulence isn’t a good reason to abandon a well-thought-out plan.

4. Keep Contributing to Your Investments

If you’re investing regularly through a 401(k), IRA, or brokerage account, keep going! In fact, a crash is when dollar-cost averaging really shows its strength. When the market is down, your regular contributions buy more shares for the same amount of money.

This is essentially a "sale" on stocks. If you believe in the long-term growth of the market, buying during downturns is one of the smartest moves you can make.

Bonus tip: If you have extra cash on hand and your emergency fund is solid, consider increasing your investment contributions during a crash.

5. Consider Buying the Dip Carefully

While “buy the dip” has become a meme, it’s rooted in logic. Crashes often create buying opportunities, especially if quality companies are being sold off indiscriminately.

But here’s the key: don’t try to time the bottom. No one knows when the market will stop falling. Instead, if you plan to invest during a downturn, do so gradually. Spreading your investments over days or weeks (a strategy called “laddering in”) can reduce your risk of going all-in at the wrong time.

Stick with strong companies or index funds that you’d feel comfortable holding for years not just ones that look cheap.

6. Strengthen Your Financial Foundation

Crashes are a wake-up call. They expose financial weaknesses and can motivate you to build a more resilient foundation. Here’s what to focus on:

• Emergency Fund: Do you have 3–6 months of expenses saved?
• Debt: Are you carrying high-interest debt that could strain you during a downturn?
• Budget: Could you trim non-essential spending if needed?

Use the crash as an opportunity to get your financial house in order. It will help you stay confident no matter what the market does.

7. Turn Off the Noise

The media thrives on fear during a crash. You’ll see headlines like “Market in Freefall!” or “Worst Day Since 2008!” These are designed to get clicks not to help you make smart decisions.

Try limiting your exposure to financial news, especially if it’s causing you stress. Check your portfolio less frequently. Read long-term perspectives from trusted sources instead of hour-by-hour updates.

Remember: reacting to headlines is not a strategy.

8. Stay Focused on the Long-Term

The stock market has historically trended upward over time. Since its inception, it has recovered from every crash, recession, and bear market.

If you’re investing for retirement, a house in 10 years, or your children’s education, a short-term dip is just a blip in the journey. What matters is where your investments are when you need them, not where they are today.

In fact, many people who stayed invested through the 2008 crash saw tremendous gains over the following decade. The same could be true for future crashes.

9. Rebalance Your Portfolio When the Dust Settles

Once the market stabilizes, it might be time to rebalance. A crash can throw your asset allocation out of sync. For example, if stocks fall 30% but your bonds remain steady, you might now be underweight in equities.

Rebalancing brings your portfolio back to its target allocation and it often means selling some assets that held up well and buying more of what’s now cheaper. This forces a disciplined, buy-low, sell-high behavior.

10. Learn From the Experience

Every crash is a learning opportunity. Reflect on how you felt, what you did (or didn’t do), and what you could improve.

Ask yourself:

• Was I too aggressive in my investments?
• Was my emergency fund sufficient?
• Did I panic or stay level-headed?
• Do I need to adjust my risk tolerance?

Use what you learn to make better decisions in the future because while crashes are scary, they’re also inevitable.

Read More: Diversify Your Stocks with Different Industries

Conclusion

A stock market crash can feel like a financial earthquake, but it doesn't have to ruin your wealth-building journey. By staying calm, sticking to your strategy, and focusing on long-term goals, you can not only survive a crash you can come out of it stronger.

The most successful investors aren’t the ones who avoid losses entirely. They’re the ones who stay the course, learn from the past, and continue investing with discipline, no matter what the market does.

So, the next time the market takes a dive, remember: your mindset is your most powerful tool. Use it wisely.