When markets drop fast, it’s natural to question everything — especially your investing routine. You might look at your regular investment going through and wonder: "should I pause and wait until things settle down?"

That hesitation is common. It doesn’t mean you’re doing anything wrong. It means you’re paying attention.

This article explores that question through the lens of dollar-cost averaging (DCA) , a strategy many long-term investors use. We’ll explain what DCA actually is, why some people rely on it, and how it holds up in volatile markets. We’ll also look at reasons someone might pause DCA, what they might miss if they do, and when it could make sense.

What is DCA, and why do people use it?

Dollar-cost averaging means investing a set amount at regular intervals — weekly, fortnightly, or monthly. Instead of waiting for the “right time” to invest, DCA keeps things consistent. The idea is simple: invest steadily, regardless of what the market’s doing. People often use DCA because:

• It reduces timing pressure : Markets move quickly, and trying to pick the best time to invest can be stressful. DCA removes that guesswork by sticking to a schedule.
• It spreads out market risk : When you invest regularly, you buy at different prices over time. This can potentially help smooth out the impact of market ups and downs.
• I t supports long-term habits : DCA can help some investors stay committed to their plan, especially during unpredictable periods. Vanguard’s research has shown that consistent investment behaviour can lead to better outcomes than trying to time the market .
• It lowers emotional interference : Investing can stir up fear and doubt, especially in downturns. DCA puts the focus on the process, not the panic.

That’s the appeal for many investors. As we’ve said, it’s common to wonder whether to pause this approach during a downturn — but first, it helps to understand what’s going on when markets crash.

What happens during a market crash?

A market crash usually means a sharp drop (around 20% or more) in share prices over a short period. It often happens fast.

During crashes, fear tends to spread quickly. News cycles ramp up. Uncertainty grows. Some investors panic-sell to avoid further losses. Others freeze.

These emotional reactions aren’t unusual. Behavioural research by Daniel Kahneman and Amos Tversky suggests that people often feel the pain of losses more strongly than gains. Data from the Australian Securities Exchange (ASX) shows that while downturns vary in depth and length, long-term trends tend to move upward. But timing that recovery is hard to predict.

This uncertainty can make even a consistent strategy like DCA feel risky, which can lead some people to consider pausing, reacting to headlines that feel urgent.

Motivations for pausing DCA

Some investors choose to pause their regular investing during a downturn. There are a few reasons why:

• Protecting capital : In uncertain times, some people want to hold onto cash. It can feel safer than investing when prices keep falling.
• Waiting for a “clearer picture” : A few investors pause to wait for stability. They might hope to re-enter the market when it feels less risky. Others may try to pick the “bottom” of the market — the lowest point before a rebound. The challenge is knowing when that actually happens.
• Changing financial priorities : When expenses rise due to job changes, interest rates or emergencies , regular investing may no longer feel manageable.

In situations like these, people may prefer to build up cash reserves, pay off debt , or meet short-term needs first. These are all understandable motivations. But as we’ll explore next, pausing DCA can have potential trade-offs, especially if the pause stretches longer than planned.

Potential downsides of pausing DCA

Pausing DCA can seem like a reasonable response, but it may also come with downsides. Here are a few to consider:

• Missing out on rebounds : Markets don’t always recover slowly. In 2020, after the sharp COVID-19 drop , the rebound began within weeks. Many investors who paused during that time missed strong returns in the months that followed. Re-entering later meant buying back in at higher prices.
• Opportunity cost of uninvested cash : Money kept in cash during a crash doesn’t grow the same way investments might during a recovery. Even modest growth in the early stages of a rebound can compound over time. Delays in reinvesting may limit that potential.
• Inadvertent market timing : It’s hard to know when to pause, and even harder to know when to restart. Many investors re-enter too late. And, as mentioned, some try to wait for “the bottom”, but that point is usually only clear in hindsight.
• Staying out too long : A short pause can stretch into months (or years) if confidence doesn’t return. That delay can have long-term effects on a portfolio.

JP Morgan’s research found that missing just the 10 best days in the market over a 20-year period can significantly reduce overall returns. Those best days can often happen close to the worst ones. That makes it easy to miss them if you’re sitting on the sidelines.

This isn’t about saying DCA is always best. But the cost of being out of the market can stealthily add up and make it hard to recover lost ground.

Potential upsides of pausing DCA

While there are risks to stepping back, pausing DCA can have potential upsides, depending on your personal situation and goals. Here are a few examples:

• Cash flow preservation : During uncertain times, having more cash on hand can create breathing room. It may help cover rising expenses or income changes.
• Reduced anxiety : For some investors, pausing may offer a sense of control. It can potentially reduce stress and create space to think clearly. Behavioural studies, including those by Vanguard , suggest that aligning your investing approach with your comfort level can support long-term consistency.
• Reallocating funds : Putting extra money toward an emergency fund or paying down debt might feel more useful than continuing to invest during volatility.

Whether pausing makes sense often depends on your financial needs, risk tolerance and broader plan.

It’s not always about maximising returns. You might simply want an investing approach that feels manageable and sustainable when markets are uncertain.

What history shows us

Looking at past market downturns, one trend stands out: investors who stayed consistent often saw stronger long-term outcomes. Of course, historical performance doesn't equate to future returns, and there's no telling what markets will do in the future. With that said, past examples can give us some insights into how the market has performed under certain conditions.

Here are a couple of notable examples of historical market crashes.

The COVID-19 crash

This crash in early 2020 saw global markets fall over 30% in weeks . But by the end of that year, many had fully recovered.

Investors who paused in March 2020 and re-entered months later often missed the sharpest part of the rebound. In contrast, those who kept investing captured the recovery from the bottom. The returns came quickly — within weeks, not years.

The Global Financial Crisis (GFC)

The Global Financial Crisis was different. It began in 2007 and lasted well into 2009. Recovery took several years. Some investors paused investing for years. Others continued investing regularly, and by the time major markets had recovered, they saw significant gains.

Again, not every period follows the same path. But historical data suggests that consistent investing through downturns has often supported long-term growth.

That doesn’t mean it’s easy. But it does highlight why pausing (especially based on fear) can potentially carry hidden costs.

Behavioural considerations

It’s one thing to know the data. It’s another thing to act on it.

Investing during a downturn can feel uncomfortable. Some investors describe it as going against every instinct. That discomfort caused by fear of losses is valid.

There’s also the risk of anchoring — focusing on recent losses and using them as a reference point for future decisions. That can make shares seem “overvalued” even after a crash, leading some investors to wait longer than they originally planned.

This is where a rules-based system, like automated DCA , can help. It removes decision-making from the heat of the moment. Sticking to a consistent plan may help reduce stress and limit reactive choices.

But that only works if the plan suits you. If a strategy creates more anxiety than it’s worth, it may not be sustainable, particularly during high-pressure periods. As we’ve said, understanding your comfort level is just as important as understanding the market. It’s not all numbers. It’s also the mindset.

Could you adjust, not pause?

Pausing DCA isn’t the only option. You might choose to tweak your approach instead of stopping altogether. Here are a few possible adjustments:

• Temporarily reducing the amount : If cash flow is tight, reducing how much you invest rather than stopping entirely may help keep the habit going. Even small amounts can support consistency without adding too much financial pressure during uncertain times.
• Rebalancing your portfolio : Rebalancing means adjusting your mix of assets to bring it back in line with your goals. Market downturns can throw that mix off. Reviewing it may help ensure your investments reflect your current plan and comfort level.
• Reviewing risk: Instead of stopping DCA, some investors take a closer look at how much risk they’re taking on. That might involve shifting to more defensive investments , building up cash buffers, or reviewing how each part of the portfolio behaves in downturns.

These are just alternatives. The goal of adjusting rather than pausing is to keep your investing aligned with your situation, without losing momentum entirely.

Framing your decision: reflective questions

There’s no single right answer when it comes to pausing DCA. But asking the right questions can bring clarity.

Do I need this money in the next 12 months?

If the funds might be needed soon, reducing investment risk or increasing liquidity could be worth considering.

Have my financial goals changed?

A shift in life plans — buying a home, changing jobs, starting a family — might call for a review of your approach.

Is the decision emotional or strategic?

Are you responding to fear or acting on a clear change in circumstances? Honest reflection here can make a difference.

Am I trying to time the market?

Stepping back is tempting when markets fall. But ask yourself: do you have a plan for when to re-enter?

These questions don’t offer easy answers. But they can help you make a decision that fits your broader goals, not just your current mood.

Staying the course vs strategic pause

Whether you continue with DCA or take a break, the choice is up to you.

As we’ve said, consistent investing has often supported long-term outcomes, but that doesn’t mean it suits everyone during a downturn. Pausing may ease pressure or support other priorities. Continuing may help maintain momentum and stay aligned with your plan.

Do what makes sense for you, based on your timeline, cash flow, and financial goals. If you’re unsure, take a step back and reflect. What’s changed in your life? What matters most to you now?

Market volatility can feel overwhelming. But decisions grounded in your context, rather than fear, are more likely to hold up over time.