Most investors who were around in early 2020 remember it clearly. The lockdown news, the empty roads, and the market falling day after day. Phones buzzed with panic. Many people asked me the same question: "Should I stop my SIP before I lose everything?" Looking back, those few weeks were one of the clearest lessons in investing behaviour I've seen. Here's what they taught, in plain words.
Falls can be fast and frightening
The first lesson is simple. Brutal, but simple. Markets can fall very quickly, and it feels terrible while it's happening. News is all bad, everyone is scared, and the screen shows red every day.
And nobody knew how far it would go. Nobody rang a bell at the bottom. There was no announcement saying "this is the worst point". It only looked obvious much later. Our page on risk and volatility explains why sharp falls are part of equity investing.
Those who kept their SIPs bought cheaply
People who kept their SIPs running through those months bought units at much lower prices than before. They didn't feel clever at the time. Many of them were nervous too. They just didn't stop.
When markets later recovered, those cheaper units helped. That's the whole idea of a SIP, explained in our page on rupee cost averaging.
Those who stopped often restarted late
Some investors stopped their SIPs to "wait until things settle". That felt sensible. But by the time things felt calm again, prices had often already recovered a lot.
So they missed the cheap period and restarted at higher prices. Our post on restarting a SIP you stopped talks about how common this is.
Selling turned a temporary fall into a real loss
The hardest cases were people who sold in panic near the low. A fall on screen is only a loss if you sell. By selling, they made a temporary drop permanent, and then many of them watched the recovery from the sidelines.
The emergency buffer mattered enormously
2020 wasn't only a market event. Many people lost income, had salary cuts, or faced medical worries. Families with an emergency buffer could keep their investments untouched. Families without one sometimes had to sell at the worst time.
That's why I keep saying the buffer comes first. Our page on building an emergency fund explains how much to keep.
Matching money to its date was the real protection
People who had money needed within a year sitting in equity were hurt the most. People whose near-term money was in steady funds or deposits could wait out the fall.
That's the core idea behind asset allocation. It isn't about predicting crashes. It's about making sure a crash can't hurt money you need soon.
Watching every day made it worse
People who checked their portfolios every hour during those weeks had a much harder time. Each new low felt like a disaster. Each small recovery felt like a reason to wait for an even lower price.
Those who looked less often, or not at all, found it far easier to stay the course. That's a habit worth building before the next fall, not during it.
Lump sums and timing
Some people with spare money tried to invest a big lump sum at "the bottom". Very few managed it. Most either went in too early and saw further falls, or waited too long and missed the rebound.
Those who spread extra money over several months did fine without needing to guess. Our page on SIP versus STP explains how to do that in a planned way.
Debt funds weren't all calm either
A smaller lesson from that time: some debt funds also had a rough patch, especially ones holding lower-rated bonds. It reminded people that debt funds aren't the same as deposits, and that credit quality matters.
Our page on credit risk funds explains what to check.
Income changes mattered as much as markets
For many families, the bigger shock in 2020 wasn't the market. It was income. Salary cuts, business shutdowns, job losses.
Those who reduced their SIPs to a level they could manage, instead of cancelling, found it much easier to restore them later. A SIP that keeps running at a lower amount is far better than one that stops completely and never restarts. Our page on how to pause a SIP explains the options.
Recovery doesn't follow a timetable
After 2020, markets recovered relatively quickly. Other falls in history took much longer. Nobody can know in advance which kind the next fall will be.
Some falls end in months. Some take years. Nobody knows which one is coming.
So the lesson isn't "markets always bounce back fast". It's "if the money is long-term and you don't need it, you can afford to wait, however long it takes".
Stories from the other side
A pattern I saw again and again after 2020: people who'd stopped their SIPs during the fall came back months later, a bit embarrassed, wanting to restart. They weren't foolish. They were frightened, like almost everyone was.
The difference wasn't intelligence. It was whether they had a plan written down before the fall started, and someone to talk to when it did.
What I'd tell someone in the next crash
- Don't make decisions on the worst news days.
- Check your buffer is intact.
- Keep long-term SIPs running if your income allows.
- Reduce or pause rather than cancel if money is tight.
- Don't sell long-term holdings to "wait for the bottom".
- Look at your plan, not the screen.
Our page on your SIP when the market falls goes into each of these.
Why we forget so quickly
Here's the odd thing. Within a couple of years, many people had almost forgotten how scary those weeks felt. Markets were higher, and the crash seemed like a small blip.
That forgetting is dangerous, because it makes people take more risk than they can really handle. The next fall will feel just as frightening. Remember how you felt in 2020, and plan for that feeling.
The calm investors weren't braver
Here's something I noticed. The investors who stayed calm weren't necessarily braver or smarter. They had simply prepared: a buffer, a clear goal, money matched to dates, and a decision made in advance not to react to the news.
Preparation beat courage. Every time. That's a lesson that applies to every fall, not just 2020.
Write your rules down now
The best time to decide what you'll do in a crash is when there isn't one. Write down a few simple rules: keep the buffer, keep long-term SIPs going, don't sell equity meant for goals more than five years away.
When the next fall comes, read them. It's much easier to follow rules you made calmly than to invent new ones while the news is screaming.
So, what did 2020 really teach?
That falls are normal, that panic is expensive, and that a simple plan made calmly in advance protects you better than any clever move made in fear.
If you'd like help preparing your portfolio for the next fall, whenever it comes, I'm happy to look. Myfolios is an AMFI-registered mutual fund distributor (ARN-145870) working from Indore since 2014. Get in touch.
