What to Do if You’ve Invested Right Before a Market Crash

30 June 2025

So, you've just thrown your hard-earned money into the stock market, full of hope and optimism… and then BAM! The market crashes. Your portfolio? In the red. Your heart? Probably in your stomach. First off—deep breath. You're not the first person this has happened to, and you definitely won't be the last.

Market crashes are scary—no sugarcoating that. But they’re also part of the investing game. If you’ve just invested before a market crash, don’t panic. Let’s break down what you can do, how to stay sane, and why this might not be as terrible as it seems.

The Nature of Market Crashes

Before we jump into solutions, let’s understand the beast. Market crashes are sharp, sudden drops in stock prices, typically due to economic shocks, political unrest, or overvaluation correction. They’re unpredictable, and they can hit hard. But here's the kicker—they’re temporary.

Think of the market like a roller coaster. It has its ups and downs—but historically, the general direction is up. Crashes are just... those stomach-lurching drops before the next climb.

Step 1: Don’t Panic—Seriously

This might sound cliché, but it’s rule number one. The worst thing you can do right after a market crash is to panic-sell. Why? Because that often locks in your losses.

Imagine buying a house, and the market dips for a few months. Would you sell the house that moment, or wait for the value to come back up? Stocks work the same way.

Keep Your Emotions in Check

Investment decisions driven by fear or anxiety rarely end well. When you panic, you stop thinking long-term and start reacting short-term—which often means selling low and missing the rebound.

Step 2: Review Your Investment Goals

Now’s a good time to revisit why you invested in the first place. Was it for retirement 20 years from now? A home down payment in 5 years? Your goals should dictate your reaction.

If your timeline is long-term, this crash might just be a blip. Historically, markets recover. It may take months, maybe even years—but recovery has always happened.

Step 3: Evaluate Your Holdings

Take a close look at what you actually invested in.

- Are your stocks fundamentally strong? If the companies still have sound business models, good leadership, and strong cash flow, there's less reason to worry.
- Are you overly concentrated? If your portfolio is too dependent on one sector or company, diversification might be an issue.

This is the moment to get analytical. Instead of focusing purely on losses, look at the quality and mix of your investments.

Step 4: Avoid Timing the Market

You're probably tempted to pull out your investment and “buy back when the market bottoms.” Sounds smart, right? Unfortunately, timing the market is notoriously difficult—even for seasoned professionals.

Miss the market’s best days and you might miss out on most of the recovery.

Example Time

Let’s say you invested $10,000 and then the market crashes 30%. Your portfolio now sits at $7,000. You panic, pull it out. The market recovers over the next year, growing 40%.

If you stayed invested, the $7,000 would’ve turned into $9,800. But if you're on the sidelines during that rebound? You’re still holding cash, licking your wounds.

Step 5: Dollar-Cost Averaging to the Rescue

One simple strategy for navigating market crashes? Dollar-cost averaging (DCA). It’s a fancy term for investing a fixed amount of money at regular intervals, regardless of the market’s condition.

Why is this smart during a crash?

Because you’re buying more shares when prices are low. Think of it like a sale at your favorite store—wouldn’t you want more for less?

By continuing to invest steadily through the downturn, you're setting yourself up for potentially great returns when the market rebounds.

Step 6: Consider Rebalancing Your Portfolio

Crashes often throw portfolios off balance. Let’s say before the crash, your asset allocation was 70% stocks, 30% bonds. But after the crash, it’s skewed—maybe now it’s 60% stocks, 40% bonds.

Rebalancing means bringing your portfolio back to its original target allocation. That could mean buying more stocks while they’re low—a move that feels counterintuitive but can pay off big time in the long run.

Step 7: Look for Opportunities

Here’s the silver lining—market crashes can bring opportunities.

Many fundamentally strong companies get dragged down in a panic sell-off. That means high-quality stocks might be available at bargain prices.

You’ve heard the phrase “buy low, sell high.” Well, low is now. If you have cash on the sidelines, a market crash could be your buying window.

Step 8: Strengthen Your Emergency Fund

If all this has you feeling a bit too exposed, it may be a sign that your emergency fund wasn’t as beefed up as it should be. Investing is great, but you need to be able to pay bills when times are rough.

Build or replenish your emergency fund—ideally 3 to 6 months’ worth of expenses. This creates a buffer so you don’t have to sell investments at a loss just to cover your rent or groceries.

Step 9: Talk to a Financial Advisor

If the crash has you completely rattled, or you’re unsure if your investments are solid, it might be time to speak with a professional. A good financial advisor can help you build a strategy, stay grounded, and take advantage of the downturn strategically.

Step 10: Reflect and Adjust Your Strategy

Once the storm settles, take some time to reflect. Were you too aggressive with your investments? Did you invest money you couldn’t afford to lose short term? Use this crash as a learning experience.

No one becomes a better investor by avoiding mistakes—they grow by learning from them.

What Not to Do After a Market Crash

Let’s flip the coin. There are some rookie mistakes you should avoid at all costs:

- Don’t obsessively check your portfolio. Watching your net worth fluctuate like a heartbeat on a monitor won’t help.
- Don’t try to “make up” for losses by gambling on high-risk stocks. Doubling down could double your losses.
- Don’t get investment advice from Twitter. Hot takes aren’t financial plans.

Real Examples of Market Recoveries

Still not convinced things will bounce back? Let’s take a quick tour of history:

- 2008 Financial Crisis: S&P 500 dropped over 50%. By 2013, it had fully recovered and hit new highs.
- COVID-19 Crash (2020): The market plummeted over 30% in a matter of weeks. Within five months? It was back on top.

History doesn’t repeat, but it often rhymes. Crashes happen, recoveries follow.

Psychological Side: Keeping Your Sanity Intact

Dealing with financial loss is mentally taxing. And let’s be honest—money stress hits hard.

Here are a few ways to keep your cool:

- Limit news intake. Too much doom and gloom can cloud your judgment.
- Stay busy. Focus on your day job, hobbies, or spend time with loved ones.
- Remind yourself of the long game. Investing isn’t a sprint—it’s a marathon.

Should You Invest More During a Crash?

Good question. If you’ve got the means and your emergency fund is solid, adding more to your investments during a crash can be smart.

Think of it like this: If stocks were valuable at $100, why wouldn’t they be even more attractive at $70?

Just don't throw all your money in at once. Use dollar-cost averaging or staggered purchases to reduce risk.

Final Thoughts: Crashes Are Part of the Journey

If you invested right before a market crash, it’s okay—really. It doesn’t mean you were foolish or unlucky. It just means you’ve joined the ranks of every investor who’s experienced a downturn.

The key is how you respond. If you stay calm, stick to a long-term plan, and maybe even scoop up some deals along the way, that crash might end up being one of the best things to ever happen to your investment journey.

Remember: Time in the market beats timing the market. So hang on tight, stay focused, and ride the wave. The climb will come.