Don't Buy The Dip!

You often hear people say you should “buy the dip”. This means that you buy into the stock market after it has fallen by a certain amount.

If you follow this strictly, buying the dip actually performs really poorly compared to a very simple strategy of just drip-feeding into the market. So In this video, I show you why this is the case and why sometimes buying the dip might not be such a bad idea after all.

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DISCLAIMER
All information is given for educational purposes and is not financial advice. Ramin does not provide recommendations and is not responsible for investment actions taken by viewers. Figures that are quoted refer to the past and past performance is not a reliable indicator of future results.

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[crcr]

Depends very much on what stocks you are buying as well

[blackstarmaster]

Would be interesting to also compare a valuation based strategy!

[bryanvo]

Thank you very much! This video came very timely for me. As the market looks like it’s crashing I was in a dilemma of whether I should continue dollar-averaging them down or wait or “sell now and get back in when it’s lower”. Your analysis helped me to make an informed decision.

[darkace]

I think people would be more interested in increments between 1-10% dips, not these monumental price collapses provided.

[hermandavid]

I love how open minded you are on investing, I found an article of investors investing in growth stocks that made up to $500, 000 within 2months from shorting, so please I'd really love more tips and clues on how to outperform the market and make such profit using options.

[slovokia]

The question is what is the return on your cash while you are waiting to invest? How much of a difference does that make to the results?

[jmausk]

If you buy the dip you also need to sell the peak. Something like sell x% at monthly highs and buy x% at monthly lows.

[pasiojala]

"Time in the market beats timing the market."
You are expected to have a cash buffer in any case. Cash buffer and regular income allows to have a mixture of "drip feed" and "buy the dip" strategies instead of the non-realistic extreme strategies.

[TabulaRasa]

BTFD should always work in a long term rising market? Still don't understand why if you had bought the SPX index at the bottom of every significant dip since March 2009, why you would be worse off than buying half the time at the top of the market cycle and the other half at the bottom of the cycle???

[dudleyjoseph]

I do both. Constant monthly drip feed and then keep a wad of cash back to buy bigger investments when the market drops. Keeping a close eye on things at the moment although I think equity generally has a lot further to fall.

[LockFarm]

This is a well established statistical view. However, being aware of individual market evaluations surely plays a part - if we're confident that the market is currently overheated, and likely to react badly to upcoming fiscal policy changes then buying it at this precise moment cannot be recommended.

It's notable that Warren Buffet has been accumulating a 'war chest' over the last few months. It's not his strategy to "buy the dip", but nor is it to invest regardless of market conditions.

[TabulaRasa]

Surely the best way is to keep buying any small dips in a long term rising market, when those dips end and the market turns up again. Then stop buying and sell some/all when the market starts going through a big sustained sell off like Feb 2020. Surely it doesn't make sense to keep drip feeding money in when markets are going through 3-4+ year bear markets. Better to wait until the bull market returns?

[rl]

Buying the dip may not work for Peloton but it may work for Apple stock.

[Solairethedarksoul]

I kept buying in chunks because of the fees my bank charges.

[schlep]

Excellent analysis based on actual market returns. Well stated and easy to understand. Well done !

[TheMoneyBaoBab]

Straight to the point. Simply explained. Fantastic content as always Ramin!

[sachmedia]

What if we do both? Buy the dip and also regularly average in.

[musheopeaus]

Best and most relevant video out there for these uncertain times

[tl]

Buy the dip works, but on particular stocks, not the index.

[dfiniin]

Just keep buying as you've been doing, be consistent every month. Nobody knows exactly the bottom, don't mess with it, consistency is key. Just my opinion. The average person doesn't know the charts.