IHSG Enters a Bear Market: A Guide for Passive Investors

A 5% drop in the IHSG (Indonesia Stock Exchange Composite Index) can still feel like a minor disruption. A 10% drop starts making WhatsApp groups noisy. Down 30% or more? That feels completely different.

At a moment like this, the usual question for passive investors changes. It is no longer “is this a good time to buy?” but “am I making a huge mistake by staying invested?”

The short answer: not necessarily. A bear market hurts, but it is not automatically a sign that your investment plan is wrong.

What is dangerous is making panic decisions when emotions are running hot.

What is a bear market?

Simply put, a bear market is when the stock market falls about 20% or more from its peak. This definition is not sacred, but it is useful as a marker: the market is not just going through a mild correction.

If the IHSG is already far below its peak, it is normal for your equity mutual fund portfolio to be in the red too. Index funds, ETFs, and actively managed equity mutual funds still hold stocks. When the stock market falls, NAV moves down too.

This is not an app error. This is how markets work.

Why does it feel heavier than a normal correction?

Because a bear market hits two things at once.

First, your portfolio value falls. Money that looked safe on your screen last month suddenly shrinks.

Second, the story around you changes. News headlines start using words like “crisis,” “outflow,” “the rupiah is under pressure,” “interest rates are rising,” and “foreign investors are leaving.” People who used to say investing should be for the long term start asking whether it would be better to move into time deposits.

The pressure is not only financial. It is psychological.

And bad psychology is often more expensive than a bad market.

Do not start with the question “sell or not?”

Your first question should not be “sell or not?” It should be:

When will this money be needed?

If the money is for school fees next year, a home down payment within 12 months, or another near-term need, then stocks really are too risky. That is not because of the bear market. From the beginning, short-term money was never a good fit for equity mutual funds.

But if the money is for retirement 15 years from now, FIRE, or another long-term goal, a big decline does not necessarily change the plan.

The stock market always has bad periods. Passive investors are paid to live through periods like this, not to guess when everything will feel safe again.

If you are just starting and need basic context, first read the guide to stock market risk in Indonesia and the earlier article on what to do when the IHSG falls. This article focuses on the heavier version: when the decline is deep enough to test your plan, not just ruin your mood for a week.

The most common mistake: stopping DCA

When the market falls hard, many people stop their regular investing.

The reason sounds sensible: “I will wait until things are clearer.”

The problem is that things usually only feel clear after prices have already gone back up. When the market is still cheap, the news is bad. When the news improves, prices have often moved first.

DCA works because you buy across many conditions: expensive, ordinary, and cheap. If you only want to buy when the mood feels comfortable, that is not DCA. That is market timing with another name.

For the mechanics, see lump sum vs DCA. The core idea is simple: DCA does not feel good when the market falls, but that is exactly when the system is doing its job.

If your cash flow is safe, your emergency fund is there, and there is no urgent need, keep your regular investments going. Even if the amount is small.

What matters is not looking brave. What matters is not breaking the system.

But what if it falls even further?

It can. Nobody knows where the market bottom is.

The IHSG could fall further after this article is published. It could also rebound sharply next week and make everyone who waited feel left behind. Both are possible.

That is why a passive investor’s strategy cannot depend on guessing the bottom.

If you have lump-sum money and your nerves are not ready, split it into several parts. For example, invest gradually over 3-6 months. Mathematically, lump sum often wins over the long run because the money starts working sooner. But psychologically, going in gradually can help you avoid panicking halfway through.

A strategy you can actually follow for 10 years is better than the optimal strategy you abandon after two weeks.

What should you check right now?

Check the things you can truly control.

1. Emergency fund

If your emergency fund is not secure yet, do not force extra stock purchases just because the market looks “discounted.” A bear market can arrive at the same time as layoff risk, delayed bonuses, or slower business. Cash still matters.

2. High-interest debt

Credit cards, paylater, and even legal online loans can have interest rates far higher than realistic stock return expectations. Pay these off first.

3. Asset allocation

If a 30% decline makes you unable to sleep, your stock allocation may be too large. The lesson is not “stocks are bad.” The lesson is “my allocation is too aggressive.”

Do not change everything while panicking. Make a note first. When things are calmer, fix your Investment Policy Statement and your asset allocation.

4. Goal time horizon

Money for the next 1-3 years should not depend on the IHSG. Use savings, time deposits, money market mutual funds, or other suitable low-risk instruments instead.

When does selling make sense?

Selling is not always wrong. What is wrong is selling without a plan.

Selling can make sense if:

• the money really will be needed soon;
• your stock allocation is too large and needs to be reduced gradually;
• you used borrowed money or operating cash for investing;
• the product you bought turns out to be unsuitable, too expensive, or not transparent.

But selling because you are “afraid it will fall further” is the problem. You have to be right twice: right when you get out, then right again when you get back in. Most people fail at the second part.

They sell when they are scared, then only dare to re-enter after prices rise and things feel safe again.

If you want to invest more, do it with rules

A bear market can be a good opportunity for long-term investors. But do not turn into a gambler just because prices are down.

Set simple rules before adding more:

• your emergency fund covers at least 3-6 months of expenses;
• you do not have major cash needs in the next 1-3 years;
• you do not have high-interest consumer debt;
• extra top-ups are capped, for example at no more than 10-20% of truly free cash;
• you stay diversified and do not go all-in on one stock or one sector.

A discount is useless if you run out of cash to live on after buying.

What to remember when your portfolio is in the red

A red portfolio is not proof that you are foolish. It is proof that you own risky assets.

If fear is starting to take over, also read fear of investing and how to stay calm when the market falls. Those two articles focus more on the mental side.

If you chose equity or index mutual funds from the start, declines like this were already part of the ticket price. Long-term returns do not come for free. They are paid for with volatility, discomfort, and the months when everyone holding cash looks smarter than you.

Passive investors do not win because they always know what will happen next. They win because they have a system that does not demand prediction.

Summary

When the IHSG enters a bear market:

• do not sell just because you are afraid;
• do not stop DCA if your personal cash flow is still safe;
• check your emergency fund, debt, asset allocation, and goal time horizon;
• separate short-term money from your stock portfolio;
• if you want to top up, use rules and do not go all-in;
• accept that the market may fall further before it recovers.

A bear market makes investing feel uncomfortable. That is normal.

The job of a passive investor is not to make fear disappear. The job is to make sure fear does not take over the decision-making.

Disclaimer: This article is for education only, not investment advice. Market data can change quickly. Check the latest data and adjust your decisions to your own financial situation.