Meta Description: Learn what to do in a market crash with a simple step by step plan. Explore bear market strategies, panic selling prevention, portfolio protection, and when to buy the dip.

When Stocks Crash, Do This: What to do in a market crash, step by step

Your screen is red. News anchors look tense. Feeds flood with hot takes. It is tempting to slam the sell button and go hide. Take a breath. This guide shows what to do in a market crash with a calm plan you can follow even when your heart rate spikes. We will walk through smart bear market strategies, real panic selling prevention tricks, and a simple investment emergency plan you can use right away. You will also learn when it makes sense to buy the dip and how to focus on portfolio protection without second guessing every move.

Why this matters right now: crashes are part of investing. They feel rare, but they show up more often than we think. A clear checklist lowers stress and lowers error. With a plan in hand, you can protect your money, avoid costly blunders, and even spot chances that others miss.

Here is the roadmap for today. First, a quick overview to put crashes in context. Next, a detailed breakdown of the key levers you control. Then, practical steps you can use today to build an investment emergency plan that fits your life. You will leave with a plan you trust.

Big picture first: bear market strategies that keep you steady

Let us zoom out for a minute. A bear market is a drop of 20 percent or more from a recent high. It feels brutal. Yet markets have recovered from every bear in modern history. That does not mean every stock recovers. It means broad, diversified markets do over time. This is the core frame for any set of bear market strategies: protect against the need to sell at the worst time, and set up a path to benefit from the recovery when it arrives.

Here are a few ideas that anchor a strong plan in any downturn.

First, match your money to your timeline. Cash and near term needs should not sit in risky assets. If your roof fund is in a volatile stock fund, your nerves will not survive the next swing. Move near term needs to cash or short term bonds. This one shift is the heart of portfolio protection.

Second, diversify on purpose. One index fund can be enough for many people, but make sure it covers many sectors and regions. A global equity index plus a core bond fund is simple, cheap, and time tested. Fewer moving parts means fewer panic clicks.

Third, prepare your brain, not just your balance. Panic selling prevention is a skill. You can practice it. Write down your rules in advance. Build an investment emergency plan that you can reach for when everyone else is yelling. A plan turns noise into a checklist.

Finally, know your risk budget. If a 30 percent drawdown will force you to sell, then you are holding too much risk for your goals. Reduce stock exposure before the storm, not during it. If the storm is already here, act with care and a schedule. We will cover that below.

Panic selling prevention in action: the cool head checklist

When prices dive, what you do in the first 48 hours matters a lot. This section gives you a step by step cool down playbook. It blends panic selling prevention, portfolio protection, and the right way to buy the dip for long term investors.

Subsection 1: Stop the emotional slide

Think of this as your first aid kit for money stress. The goal is to pause the fear loop and buy yourself time to think.

Step 1: Close the trading app. Set a 24 hour decision window. If you must make a move, do it at a set time the next day, not right now. This tiny delay is a powerful panic selling prevention trick.

Step 2: Check your cash runway. How many months of expenses do you have in cash or safe reserves. Aim for at least three to six months. If the answer is low, do not sell stocks in a rush. Instead, plan a measured shift over weeks, not minutes.

Step 3: Reread your investment emergency plan. If you do not have one yet, use the template later in this article. A plan reminds you of your target mix and the reasons behind it. It also tells you what not to do.

Step 4: Name the fear. Are you afraid of losing your job, or watching numbers fall, or missing a recovery. Naming the fear helps you match the right tool. For job risk, you need more cash buffer. For market fear, you need clarity on risk limits and time horizon.

Step 5: Set a news diet. Limit market news to two short windows a day. Turn off alerts. Your plan will do the heavy lifting, not the headlines.

Here is a quick story. In March 2020, my friend Maya saw her account drop fast. She almost sold everything. Instead, she pulled up her written rules. She had a target mix of 70 percent stocks and 30 percent bonds. The crash had pushed her to 60 percent stocks. Her rule said: rebalance back toward target in two steps. She did that over two weeks. It felt scary, but her plan called the shots. A year later, she was glad she stayed the course. The point is not to copy Maya. The point is to let your plan speak when fear is loud.

Subsection 2: Build a strong portfolio protection toolkit

After the first calm down, move into structure. This is about shaping your holdings so that crashes hurt less and recoveries help more. You will see a mix of defense and offense here. Use only what fits your situation.

Defense moves for portfolio protection:

• Right size your bond sleeve. High quality bonds can soften the blow when stocks drop. Many investors hold 20 to 40 percent in bonds, depending on age and goals. The right mix is the one you can live with.
• Keep a cash bucket for near term costs. Three to twelve months of expenses in cash or cash like accounts lowers the chance you must sell stocks at a low.
• Rebalance with guardrails. Set a band, such as plus or minus 5 percent around your target mix. When your mix drifts beyond that band, rebalance back toward target. In a crash, that often means trimming bonds and adding to stocks. Hard to do, but it buys low by rule, not by feel.
• Simplify holdings. Too many funds add confusion. A core stock fund and a core bond fund cover a lot of ground. Add more only if you have a clear reason.
• Be careful with hedges. Inverse funds and options can be sharp tools. If you are not trained on them, they can do harm. Portfolio protection starts with right sizing risk, not with fancy trades.

Offense moves, done with care:

• Dollar cost averaging into weakness. Set a schedule to add a fixed amount every two weeks or monthly. It removes guesswork and makes buy the dip a habit rather than a hunch.
• Use valuation signals as a backdrop, not a trigger. If broad markets trade far below long term averages, lean slightly into risk within your rebalancing plan. Stay humble. Valuation is helpful, not a crystal ball.
• Tax loss harvesting where it fits. In taxable accounts, selling a declined fund to capture a loss and swapping into a similar fund can lower taxes. Mind the wash sale rule. The aim is long term tax efficiency, not day trading.

One more guardrail: avoid all in or all out moves. They feel bold, but they often hurt results. A series of small, planned steps wins more often than a single big bet.

Subsection 3: How and when to buy the dip without guessing

Buy the dip is a catchy phrase. It does not mean buy every down day. It means buy more of a good, diversified asset at better prices, inside a rules based plan. Here is a simple way to do that.

Tip 1: Tie buy the dip to rebalancing bands. If your stock mix falls more than 5 percentage points below target, add enough to move halfway back toward target. If it stays low, add again on a schedule.

Tip 2: Use a preset calendar. For example, buy on the second Tuesday of the month if the market is below its 200 day average. Keep it simple. The point is not to time a bottom. The point is to keep buying through fear.

Tip 3: Keep a small dry powder bucket. Hold 5 to 10 percent in cash that you only deploy during drawdowns. When the market drops 10 percent, deploy one third. At 20 percent down, deploy the next third. At 30 percent down, deploy the final third. Then stop and let time do its work.

Common mistakes to avoid:

• Chasing single stocks on headlines. Dips can turn into value traps. Focus on broad funds unless you have deep research and a clear edge.
• Ignoring fees and taxes. Rapid trades create drag. Stick to low cost funds and avoid taxable churn where you can.
• Moving the goalposts. If you set rules, follow them. Do not double your risk mid crash because you feel lucky. Do not abandon your plan because the last week scared you. Plans beat moods.

Expert style insight in plain words: most long term returns come from staying invested, rebalancing on schedule, and keeping costs low. Buy the dip works best when it is part of that trio, not a stand alone stunt.

Section 3: Practical checklist you can use today

Here is a simple, straight to the point investment emergency plan. Copy it, tweak it, tape it to the inside of your notebook. Use this for panic selling prevention, portfolio protection, and steady buy the dip habits.

1. Write your purpose. Example: Grow wealth for retirement in 20 years. Accept normal ups and downs to reach this goal. This purpose guides choices when noise grows.
2. Define time buckets.
   • Now to 2 years: cash and short term bonds.
   • 3 to 7 years: a mix of bonds and stocks.
   • 8 plus years: mostly stocks with some bonds.
3. Set your target mix. Example: 70 percent global stocks, 30 percent bonds. Choose a simple two or three fund setup.
4. Pick rebalancing bands. Example: rebalance when any sleeve is 5 percentage points off target. Move halfway back toward target each time.
5. Establish your cash runway. Minimum 6 months of expenses in cash like reserves if your job is cyclical. Minimum 3 months if your income is stable and secure.
6. Define your buy the dip rules. Example: deploy 3 tranches of dry powder at 10, 20, and 30 percent market declines from recent highs. Only into broad index funds.
7. Create a trade window. Allow trades only on Wednesdays after market open, or only on the second and fourth Friday of each month. This forces a pause and blocks impulse clicks.
8. Set a news limit. Two 15 minute windows a day for news, max. No trading based on breaking headlines.
9. Document deal breakers.
   • No all in or all out moves.
   • No single stock buys during a crash.
   • No options or leverage unless pre approved in writing by your future calm self.
10. Plan tax moves. For taxable accounts, list your loss harvesting pairs now. Example: Total Market Fund A swaps to Total Market Fund B that tracks a different index. Note the wash sale rule.
11. Write your panic script. When fear spikes, read this aloud: I do not need to act fast. I will follow my plan. I will focus on the next step, not the next headline.
12. Set alerts for your bands. Use a simple spreadsheet or portfolio app to flag when your mix drifts beyond your rebalance range.
13. Revisit your plan quarterly. Update your cash runway, target mix, and tax notes. Small upkeep now prevents big mistakes later.
14. Assign a calm buddy. Share your plan with a trusted friend or partner. During a crash, text them before you trade. The act of explaining your move will slow you down and improve your choices.

Extra tips to tighten the plan:

• Automate contributions on payday. Automation is stealth buy the dip. It removes emotion and builds wealth in the background.
• Keep fees low. Every extra percent in fees is a percent that does not compound for you. Choose index funds or low fee active funds you truly trust.
• Mind sequence risk if you are near retirement. Add more bonds and cash to cover the next few years of spending. This is critical portfolio protection for new retirees.
• Use guardrails for withdrawals. Set a base withdrawal rate. Cut spending a bit after very bad years. Raise it a bit after strong years. A small adjustment can add many years of safety.
• Write your stop loss for behavior, not price. Example: If I feel an urge to sell everything, I will wait 72 hours and talk to my calm buddy first. Behavior rules beat price triggers.
• Check employer risk. If your income and company stock both fall in a downturn, you face double risk. Keep company stock to a small slice of your total portfolio.
• Have a plan for debt. High interest debt is a risk amplifier. If a crash hits and you carry heavy debt, consider pausing extra investing to pay it down faster.
• Do a dry run. Practice rebalancing in a mock account. Preview tax forms for loss harvesting. Walk through your plan like a fire drill. The first time should not be during a real emergency.

What to do in a market crash often comes down to this: protect your downside so you do not need to sell low, and keep a simple, rules based path to add risk when the odds improve. These practical steps do both.

Conclusion: Your calm plan beats the storm

Crashes feel like chaos, but your actions do not have to be. With clear bear market strategies, strong panic selling prevention habits, and a written investment emergency plan, you have the tools to make steady choices. You protect cash you need soon. You defend your core with a mix you can hold. You rebalance by rule. You buy the dip in measured steps, not with guesses. Most of all, you let time and compounding do their quiet work.

Here is your quick recap:

• Decide your target mix and set rebalancing bands before stress hits.
• Build a cash runway and bond sleeve sized to your real life needs.
• Limit news, slow down trades, and use a preset trade window.
• Buy the dip with a rule set, not vibes. Small tranches, wide margins.
• Review and refine your plan every quarter so it stays fresh and useful.

No plan removes risk. A smart plan makes risk tolerable and keeps you invested long enough to reap the rewards. When the next downturn arrives, you will not be asking what to do in a market crash. You will already know. Print your plan, share it with your calm buddy, and take the next small step today.

Quick note: This article is for education. Your money and goals are unique. If you need tailored advice, consider a fee only advisor who acts as a fiduciary.