The 'Keep Buying' Strategy: What Happens to Your SIP When the Market Crashes 30%?

Author: WealthTacticsHQ Research Team | Read Time: 20 Minutes | Category: Risk Management

Introduction: The Panic of the Red Portfolio

Imagine this: You open your investment app on a Tuesday morning. Your portfolio, which was up 15% last month, is now down 20%. Your hard-earned savings are evaporating right before your eyes.

You switch on the TV. The news anchors are shouting.

• "Sensex Crashes 1,000 Points!"

• "Is this the beginning of a Recession?"

• "Billions of Investor Wealth Wiped Out!"

Your WhatsApp groups are even worse. Your uncle is forwarding messages saying, "Sell everything and move to Fixed Deposits before it goes to zero!"

This is what a Bear Market feels like. It is visceral. It is terrifying. And it feels permanent.

The natural human instinct in this situation is to Stop the Pain.

• "I'll pause my SIP now and restart when the market stabilizes."

• "Why throw good money after bad?"

It sounds logical. It feels safe. But it is the single most expensive mistake you can make.

At WealthTacticsHQ, we analyzed historical crash data (2000, 2008, and 2020) to prove a counter-intuitive truth: A market crash is the best thing that can happen to your SIP.

In this guide, we will show you the math behind the "Keep Buying" Strategy and how continuing your SIP during a 30% crash can actually supercharge your wealth.

Part 1: The Scenario (The 2020 COVID Crash)

Let’s rewind to January 2020. The markets are doing well. Two investors, Panic Pooja and Disciplined Dev, are both running an SIP of ₹10,000 in a Nifty 50 Index Fund.

Then, March 2020 hits. The pandemic is declared. The world shuts down. The Nifty 50 crashes from ~12,000 to ~7,500 in weeks. A drop of nearly 40%.

The Reaction

1. Panic Pooja: She sees her portfolio bleeding. She gets scared. She stops her SIP in March to "wait for clarity." She keeps the money in her bank account to "protect" it. She restarts her SIP in November 2020 when the market hits a new high (because she feels safe again).

2. Disciplined Dev: He ignores the noise. He treats his SIP like an EMI—non-negotiable. He keeps his ₹10,000 SIP running through March, April, May, and June—the worst, scariest months of the crash.

Part 2: The Math of the Crash (Rupee Cost Averaging)

Why did Dev make the right choice? The answer lies in NAV (Net Asset Value).

When the market falls, the price of mutual fund units drops. Think of it like a supermarket sale.

• January (Market High): NAV = ₹100. Your ₹10,000 buys 100 Units.

• March (Market Crash): NAV drops to ₹60. Your ₹10,000 buys 166 Units.

The Accumulation Table (March - June 2020)

The Magic:
Because the market crashed, Dev was able to buy units at a massive discount. He accumulated more units for the same amount of money. Pooja bought zero units at the "Sale Price." She literally walked past a 40% discount sale and bought nothing.

Part 3: The Recovery (The Slingshot Effect)

Fast forward to November 2020. The markets recovered and hit new highs. The NAV is back up to ₹130.

Let’s calculate their Portfolio Value for this specific period.

Panic Pooja:
She missed the crash. She held onto her old units, but she didn't buy any new ones at the bottom. Her recovery is flat. She merely "survived" the crash.

Disciplined Dev:
He owns 424 Units (many bought at cheap prices of ₹80 and ₹90).

• Current Value: 424 Units * ₹130 NAV = ₹55,120.

• Total Invested: ₹40,000.

• Profit: +37% Absolute Return in just 8 months.

By buying when the market was down, Dev lowered his Average Cost of Acquisition. When the market bounced back, his portfolio acted like a compressed spring—shooting up faster than the market itself.

Conclusion: Pooja avoided the "loss" in March, but she also missed the wealth creation in November.

Part 4: The Emotional Cycle of Investing

If the math is so simple, why do intelligent people stop SIPs? The answer lies in the Cycle of Market Emotions.

1. Optimism: Markets are up. You start an SIP happily.

2. Anxiety: Markets dip 10%. You check the app daily.

3. Fear: Markets dip 20%. You stop checking the app. You wonder if you made a mistake.

4. Capitulation (The Bottom): Markets dip 30%. This is the breaking point. You say "I can't take this anymore" and you sell or stop the SIP. This usually happens exactly at the bottom.

5. Relief: Markets bounce back 10%. You feel smart for selling.

6. Regret: Markets hit an All-Time High. You realize you sold at the bottom. You buy back in at a higher price.

The Solution:
You must recognize that Capitulation is a feeling, not a fact. When you feel the strongest urge to stop your SIP, that is the precise moment the "slingshot" is being pulled back.

Part 5: Tactical Playbook: Advanced Moves for Crashes

Don't just survive the crash; exploit it. Here are three advanced moves for the brave investor.

Move 1: The "Rebalance" Technique

If the stock market crashes 30%, your asset allocation will skew.

• Before Crash: Equity (60%) / Debt (40%)

• After Crash: Equity (45%) / Debt (55%) (Because equity value fell).

The Strategy: Sell some Debt (Liquid Funds/FDs) and move it into Equity to bring it back to 60%. This forces you to "Sell High" (Debt) and "Buy Low" (Equity) automatically.

Move 2: The Smart Lumpsum

Never invest all your spare cash at once during a crash (what if it falls more?).

• Strategy: Break your spare cash into 4 parts. Invest one part for every 5% drop in the Nifty.

• Nifty falls 10% -> Invest Part 1.

• Nifty falls 15% -> Invest Part 2.

• Nifty falls 20% -> Invest Part 3.

Move 3: Digital Detox

If seeing red numbers stresses you out, the best tactical move is to uninstall the app.
Your SIP runs on the bank server, not your phone. If you don't see the crash, you won't react to it. Reinstall the app after 6 months.

Part 6: Expert Verification (Historical Data)

Is 2020 a one-off case?

No. We analyzed the 2008 Global Financial Crisis—the grandfather of all crashes.

• The market fell 60%.

• It took nearly 2 years to recover.

• The Result: Investors who continued SIPs throughout 2008-2009 saw their portfolios recover by 2010 and generate a CAGR of 20%+ over the next 5 years.

• The Cost of Fear: Investors who stopped and waited for "stability" took 3-4 years longer to recover their losses.

The Rule of Thumb:
Volatility is not the risk of investing; it is the fee you pay for high returns. If you aren't willing to pay the fee (endure the crash), you don't get the reward (long-term compounding).

Part 7: Frequently Asked Questions (FAQs)

Q1: Should I stop my Small Cap SIPs during a crash?

Answer: Small caps fall harder (50-60%) than Large caps (30%) during a crash. However, they also recover faster. If your time horizon is 7+ years, continue the SIP. Buying Small Caps during a crash is like buying lottery tickets that have a high probability of winning.

Q2: How long do Bear Markets last?

Answer: Historically, Bull markets (upside) last for years (3-5 years), while Bear markets (downside) are shorter and sharper (9-18 months). The pain is intense but temporary.

Q3: Is it safe to do a Lumpsum investment now?

Answer: In a crash, yes. But don't go all in. Use the STP (Systematic Transfer Plan) route. Put the lumpsum in a Liquid Fund and transfer it to Equity weekly/monthly over 6 months. This protects you if the market falls further.

Conclusion: Make Volatility Your Friend

The next time the market crashes (and it will), do not look at your portfolio value. Look at the NAV.

If the NAV is down 30%, tell yourself: "Great! I am getting a 30% discount on my future wealth."

Your Bear Market Action Plan:

1. Never Stop an SIP: Treat it like a utility bill. It must be paid.

2. Top-Up if Possible: If you have spare cash during a crash, add a lumpsum. It’s like buying gold at half price.

3. Ignore the Noise: News channels sell fear. You are buying a future.

Market down? That's good news for your SIP.
Check how volatility helps you average out costs using our SIP Calculator.

🟢 Key Takeaways

• Crashes are Sales: A market drop allows you to buy more units for the same price (Rupee Cost Averaging).

• Don't Time the Bottom: You will miss it. Consistent buying captures the average price automatically.

• The Recovery is Fast: Markets often recover sharply. If you are out of the market during the bounce-back, your returns suffer permanently.

• Keep Buying: The investors who make the most money are the ones who keep buying when everyone else is selling.

Disclaimer: This article is for educational purposes only. Past performance of markets (2008, 2020) does not guarantee future patterns. Please consult a SEBI-registered investment advisor.