Key takeaways
✓
Every market crash in history has been followed by full recovery and new all-time highs✓
Continuing SIP through a crash automatically buys more units at lower prices✓
Investing a lumpsum in the March 2020 crash returned 140% by December 2021✓
The psychological barrier: fear — markets feel most dangerous exactly when opportunity is greatest✓
Preparation matters: emergency fund + dry powder before crashes enable action during them₹5L
invested Mar 2020 crash
Nifty at 7,610
₹12L
value by Dec 2021
140% return in 21 months
₹11L
same investment Jan 2020
invested at peak, same end value
-38%
Nifty fell in 40 days
Jan–Mar 2020
💡
Why crashes create wealth — the mechanics
A company earning ₹100 crore/year in normal times might be priced at ₹5,000 crore (P/E of 50).
During the crash, panic drives the price to ₹2,500 crore (P/E of 25).
The business hasn't changed. The earnings are ₹100 crore. The management is the same. The customers haven't disappeared.
You are buying the same earnings stream at half the price. When panic subsides, prices return to normal valuations. The wealth is created in the gap between panic pricing and fundamental value.
✅
What your SIP does automatically during a crash
Normal month: ₹5,000 buys 100 units at ₹50 NAV.
Crash month: ₹5,000 buys 167 units at ₹30 NAV.
Recovery month: ₹5,000 buys 111 units at ₹45 NAV.
When NAV returns to ₹50:
• Your crash-month 167 units are worth ₹8,350 — a 67% gain on that month.
You did nothing extra. The automatic SIP bought more when prices were low.
The one rule: DO NOT CANCEL YOUR SIP DURING A CRASH. The units bought in those months will be your most profitable investments.
Investor behaviour during crashes — two paths
✅ The wealth-building response
✓
SIP continues automatically — no decisions needed✓
Does not check portfolio daily✓
If has surplus cash: deploys in tranches (20% at -20%, more at -30%)✓
Reviews goals: retirement is still 20 years away — nothing has changed✓
Outcome: significant wealth created in recovery❌ The wealth-destroying response
✓
Cancels SIP — 'until markets stabilise'✓
Sells equity to 'avoid further losses'✓
Waits for 'all clear' before re-investing✓
Re-enters 6–18 months later — at higher prices✓
Misses the recovery rally almost entirelyPrepare for the next crash — do this now, not during it
1
Emergency fund first
3–6 months expenses in a liquid fund. This ensures you will not need to sell investments during a crisis for living expenses.
2
SIP on auto-debit
Not manual. Auto-debit requires zero willpower during a crash. It runs without you having to make any decision.
3
Keep some dry powder
A small allocation (10–15% of portfolio) in a liquid or short-duration fund specifically for opportunities. When markets fall 25%+, deploy it in tranches.
4
Know your goal timelines
Money needed in under 3 years: not in equity. Money for goals 7+ years away: stays in equity through any crash. Clarity on this prevents panic selling.
⚠Educational content only. Numbers shown are illustrative — actual returns vary. This is not investment advice. Consult a SEBI-registered financial advisor before investing.
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