As the stock market experiences another downturn, some investors find themselves tempted by the prospect of “buying the dip.” This strategy involves purchasing assets at temporarily reduced prices, hoping to capitalize on future gains. However, financial advisors are advising caution, urging their clients to maintain their long-term investment strategies amid the current market volatility.
The U.S. stock market took a significant hit on Thursday following President Donald Trump’s announcement of sweeping tariffs affecting numerous countries and territories. This triggered a sell-off, which continued into Friday as China retaliated with a hefty 34% tariff on all American imports.
By late Friday, the Dow Jones Industrial Average had tumbled more than 1,700 points, adding to a drop of 1,679.39 points the day before. The S&P 500 fared no better, falling 4.8% after a 4.84% decline on Thursday. Meanwhile, the tech-heavy Nasdaq Composite lost 4.9%, following a steep 5.97% slide the previous day.
For those eyeing this dip as a buying opportunity, here’s some expert advice to consider from seasoned financial advisors.
### Timing the Market: A Tall Order
Whenever asset prices drop, communities like Reddit spark discussions about whether to “buy the dip.” The aim is straightforward: purchase investments at a discount and wait for an eventual recovery to pocket future profits.
Though investing in cheaper stocks might seem like a good idea, executing this strategy can be challenging. Accurately timing the market is nearly impossible, caution industry experts.
Certified Financial Planner Eric Roberge, who serves as the CEO of Beyond Your Hammock in Boston, notes, “We never recommend trying to time the market because it’s something you cannot achieve without sheer luck.”
According to him, investors should focus on a well-considered, rules-based investment plan aimed at meeting their long-term goals.
### Adopting a Disciplined Investment Approach
When purchasing assets during a market dip, maintaining a disciplined approach is crucial, advises CFP Jay Spector, co-CEO of EverVest Financial based in Scottsdale, Arizona.
Some investors might find themselves sitting on cash, waiting for the absolute lowest prices. However, pinpointing the market’s bottom is impossible, experts warn.
Waiting too long can be disadvantageous, especially since the best returns often succeed the steepest declines, as research from Bank of America shows.
Instead of attempting to predict the bottom, Spector recommends dollar-cost averaging, which involves systematically investing a fixed amount of money at regular intervals. This method can help capture lower prices while minimizing risks, he explains.
