- With the ongoing tariff sell-off, many investors are inclined to “buy the dip,” taking advantage of temporarily lower asset prices.
- Nonetheless, experts warn that this strategy can be challenging since predicting stock market movements is impossible.
As the stock market experiences a downturn, an increasing number of investors are keen to “buy the dip” by acquiring assets at lower prices. Financial advisors, however, recommend that clients adhere to their long-term investment strategies during this period of volatility.
On Thursday, U.S. stocks fell sharply after President Donald Trump announced extensive tariffs affecting over 180 countries and territories. The decline persisted on Friday following China’s announcement of a 34% retaliatory tariff on all goods imported from the U.S.
As of Friday afternoon, the Dow Jones Industrial Average had dropped more than 1,700 points, following a decrease of 1,679.39 on Thursday. Meanwhile, the S&P 500 was down 4.8% after a 4.84% loss the day prior, and the tech-heavy Nasdaq Composite fell by 4.9% after a 5.97% drop on Thursday.
More from Personal Finance:
‘Time is running out’ to claim an IRS stimulus check, warns tax expert
Disability advocates file lawsuit against Social Security and DOGE to prevent service cuts
Jean Chatzky: In light of tariff disturbances, ‘timing the market is not advisable’
If you are seeking investment opportunities while prices are low, consider the following tips from financial advisors.
Timing the market is ‘impossible’
During times of falling asset values, discussions often arise in online forums like Reddit about the idea of “buying the dip.” Typically, investors hope to acquire assets at a discount, aiming for a future recovery that leads to gains.
While obtaining investments at lower prices can be beneficial, executing this strategy effectively is complicated, as experts agree it’s impossible to forecast market movements accurately.
“We never endorse trying to time the market because it is essentially a matter of luck,” stated certified financial planner Eric Roberge, CEO of Beyond Your Hammock in Boston.
Instead, he advises maintaining a “thoughtful, rules-based investment strategy that aligns with your long-term goals.”
Maintain a ‘disciplined approach’
According to CFP Jay Spector, co-CEO of EverVest Financial in Scottsdale, Arizona, adopting a “disciplined approach” is crucial when purchasing assets during a market decline.
For instance, some investors opt to remain in cash, waiting for prices to hit rock-bottom. However, experts note that predicting the market’s lowest point is not feasible.
Staying on the sidelines can be detrimental as the best returns often follow significant declines, as indicated by research from Bank of America.
Rather than attempting to pinpoint the market bottom, consider practicing “dollar-cost averaging,” which involves investing a fixed amount of money at regular intervals, as Spector suggested. This method helps to capture lower prices while mitigating risk.
