What Investors Should and Should Not Do During a Market Crash

The market’s recent dips, dives, and recoveries have once again sent waves of uncertainty through the investing world. My phone hasn’t stopped ringing—family, former clients, friends, even distant acquaintances are all asking the same thing: “Sheryl, what should I do?”

It’s a familiar refrain I’ve heard during every market downturn in my career. And the answer, while not one-size-fits-all, begins with one key idea: Not everyone needs to act. In fact, most people shouldn’t.

Understanding Market Volatility

Let’s face it—volatility is unsettling. Watching your portfolio shrink feels like watching your financial future unravel. But what to do during a market crash depends entirely on your individual circumstances. Before making any changes, take a breath and assess whether action is actually needed.

Who Should Consider Adjustments?

There are times when changes make sense. Consider reassessing your strategy if you fall into one of these categories:

• Nearing or in retirement: Drawing income during a downturn can accelerate losses. You may need to adjust your withdrawal rate, increase cash reserves, or shift to more conservative investments. The sequence-of-returns risk is real and can’t be ignored.
• Short-term financial goals: Need money in the next few years for a home, tuition, or large purchase? Ensure your cash holdings are sufficient. Selling at a loss to meet a short-term goal can derail long-term progress.
• Misaligned asset allocation: If your portfolio has become too concentrated in one sector or asset class, now is the time to rebalance. A diversified portfolio helps buffer the impact of market swings.
• Life changes: Major events—job loss, medical emergencies, divorce—can justify portfolio changes. Revisit your financial plan if your life circumstances shift dramatically.

Who Should Stay the Course?

For most investors with long-term horizons, sticking to the plan is the smartest move. Here’s why:

• Time is on your side: Markets have always rebounded from downturns. Selling during a dip just locks in losses. Staying invested gives you a chance to participate in the recovery.
• Avoid emotional decisions: Panic selling feels like action, but it’s often the worst thing you can do. The phrase “I can’t afford to lose more” is usually followed by missing the rebound. If your plan accounts for volatility, let it do its job.
• Diversification works: A well-diversified portfolio can absorb market shocks better than one concentrated in a few high-risk areas.

How to Know If You Should Be Concerned

Ask yourself these key questions during uncertain times to invest:

• Has my financial situation fundamentally changed?
• Am I reacting emotionally or making a rational decision?
• Does my asset allocation still reflect my risk tolerance and time horizon?
• Do I need this money within the next five years?

If the answer to most of those is “no,” you likely don’t need to act at all.

What If This Time Is Different?

This is one of the most common fears I hear during a crash. And you’re right—every crash is different. The causes change: saving and loan crisis, 9/11, dot-com bust, the financial crisis, and now perhaps tariffs or geopolitical tensions. But the market’s response—volatility followed by recovery—is the consistent part.

Stay calm. Turn off the news. Stop refreshing your portfolio balance. Investing isn’t about reacting to every headline—it’s about trusting your plan.

And if you’re still unsure, reach out to a trusted financial advisor. In uncertain times to invest, having a steady guide can make all the difference.