Under a “buy the dips” strategy, investors look to purchase a stock or index that has seen a recent price decline. The idea behind the strategy is to exploit market fluctuations with the belief that, as long as the investment remains sound, the price should eventually rise again. Like a value investing strategy, the buy the dips approach is about buying good companies at discounted prices.
Buying the dips is a strategy often seen in bull markets where short-term downside moves may be experienced as part of an overall upward trend. The risk for the investor though is that the correction is not a temporary one but the beginning of a longer-term downward trend- a bear market.
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The above information is educational and should not be interpreted as financial advice. For advice that is specific to your circumstances, you should consult a financial or tax advisor.
