Stock Market Crash: What to Do (and What Not to Do) When It Happens
By Marcus Cole8 min readUpdated July 5, 2026
Market crashes are not unusual events. They are a normal part of investing. The thing that breaks portfolios is rarely the crash itself — it is the panic decisions made during one. Nobody taught us this. Let me fix that.
What a 'crash' actually is
Different sources define a crash differently — a sharp drop over a short period, a bear market of 20% or more from a recent peak, or a sudden one-day decline. The label matters less than what you do next.
What not to do
Don't check your portfolio every 15 minutes. Don't sell your long-term investments to 'wait it out' in cash without a plan to get back in. Don't make portfolio changes based on cable news or social media.
What long-term investors usually do
They keep automatic contributions running, leave their long-term portfolio alone, and use the moment to review whether their risk tolerance matches their actual reaction.
When it's reasonable to act
Rebalancing back to your target allocation, harvesting tax losses in taxable accounts where allowed, and reviewing emergency fund adequacy can be reasonable during downturns — none of those are 'timing the market.'
Risk tolerance is what you do, not what you say
If a crash makes you want to sell everything, your real risk tolerance is more conservative than your plan assumed. That's useful information for the next calm period — not a reason to act now.
Key facts
- Crashes are normal in long-term market history.
- Past patterns do not guarantee future behavior.
- Selling at the bottom locks in losses; the comeback is usually missed by people who left.
Step-by-step
1. Step away from the screen
Take 24 hours before any portfolio decision.
2. Confirm your time horizon
Money you need in 1–2 years should not have been in stocks in the first place.
3. Keep automatic contributions running
Downturns are when DCA buys at lower prices.
4. Review your emergency fund
Cash matters more in downturns than clever moves.
5. Note how you actually feel
Use it to adjust allocation later — not now.
Practical example
An investor watches the market drop sharply over several weeks. They keep their monthly contributions on, avoid checking their balance daily, and write themselves a note: 'Next calm market, revisit stock/bond split because this felt worse than expected.'
Common mistakes to avoid
- Selling long-term investments to 'just be safe.'
- Trying to time the bottom.
- Stopping contributions during downturns.
- Making big changes based on a few scary headlines.
Frequently asked questions
Should I buy more during a crash?
If your existing plan includes recurring contributions, you're already buying at lower prices. Don't pile in beyond what your plan and emergency fund support.
What if I'm close to retirement?
That's a sign to review allocation before the next downturn, not to make rushed changes in the middle of one.
How long do crashes usually last?
Historically they vary widely. No one can reliably predict the length or depth of any specific downturn.
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About Marcus Cole
Marcus is a 34-year-old financial educator who paid off $47,000 in debt and now explains money in plain language. Nobody taught us this. Let me fix that.
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