A woman buying the dip

What does it mean to “buy the dip”?

Buying the dip has become a bit of a meme, but don’t be fooled, it’s still seen as a strong investing strategy. You might think seeing a stock tumble in price is a bad thing for an investor, but often, it can present a sweet buying opportunity.

Definition of "buying the dip"

Investors who are buying the dip are purchasing stocks and shares when the market is low (or has taken a dip). They are hoping to pick up some bargains and may want to sell the same stocks for a higher price in the future. 

It's a bit like when you wait to buy something in the January sales. You know each January there's going to be a sale and for a short time you can buy some items at a lower price. The overall idea is the same; you’re trying to get more bang for your buck.

Unlike the January sales though, we don't know when the stock market is at its lowest, which is why there's always an element of risk when investing. For example, you could see a stock at £50 drop to £40 and think it’s a smart buy, only for it to drop and remain at £30 (trust me, I’ve been there).

Buying the dip meme

Keeping cash spare is investing 101, you never know what costly life event could come your way. If you’re attempting to time the market by buying the dip, then it’s important to keep even more cash spare. That way, you have an allocated amount ready to invest into the market that is separate to your ‘everyday’ cash reserve.  

Of course, this differs from the ‘dollar-cost averaging’ strategy that is more about the buy-and-hold life and prioritises time in the market over timing the market!

For other key terms explained, be sure to visit our articles:

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Meet the authors

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James Ashoo

Senior Content Writer

James has been investing for over five years. His aim is to explain the hard stuff, easily! When he's not chewing your ear off about stocks and crypto, he'll most likely be telling bad jokes.

Harjas Singh

Harjas Singh

Chief Product Officer & Co-Founder

With a wealth of experience in fintech, Harjas is the man in the know when it comes to all things product. Investing features, chatting capabilities and thriving communities – he oversees all development on the Shares app!

Harry Harrison

Harry Harrison

Finance Writer

Harry is an experienced business writer, with a love for all things tech. In his free time, he enjoys reading, playing sport and winning at chess. He also loves posting inside the Shares app!