After several market cycles, I stopped automatically buying every 8-12% dip like I used to.
Too many times I averaged down into companies with weakening fundamentals just because the price looked cheaper. It ended up tying up capital for months with poor results. Now I only add significant capital when there’s a clear catalyst and reasonable margin of safety. Otherwise, I stay patient and keep dry powder. Have other investors also become more selective with dip-buying this year, or are you still averaging down aggressively?
Why I’ve become much more selective with "buy the dip" opportunities
byu/VelixaNtra ininvesting
Posted by VelixaNtra
4 Comments
You learned that instead of just buying on a dip, you should learn why the dip happened? I mean … sure. Congrats.
You’re just not liquid enough.
I buy/rebalance to my plan. If I’m at my plan, I’m good, no matter how good the deal looks.
8-12% dip is such a wild swing that usually means the company is unstable.
That said, people need to compare the price to their own set fair value price. Not to what it was trading yesterday. The dip is only a dip when it dips below that line you set. It could be 110% overpriced dipping to 90% overpriced. Still a bad buy.