- As the tariff sell-off accelerates, certain investors may be inclined to “buy the dip,” or acquire assets at temporarily reduced prices.
- Nevertheless, experts caution that this strategy can be challenging since predicting future stock market movements is inherently uncertain.
With the stock market continuing its decline, many investors are keen to “buy the dip,” or purchase assets at reduced prices. Financial advisors, however, recommend that clients adhere to their long-term investing strategies amidst the current volatility.
U.S. stocks experienced a sharp decline on Thursday following President Donald Trump‘s announcement of extensive tariffs impacting over 180 countries and territories. The sell-off persisted on Friday after China revealed plans to impose a 34% retaliatory tariff on all imports from the U.S.
By Friday afternoon, the Dow Jones Industrial Average had fallen over 1,700 points, following a drop of 1,679.39 the day before. At the same time, the S&P 500 declined by 4.8%, after a loss of 4.84% the previous day. The tech-heavy Nasdaq Composite decreased by 4.9% after a sharp 5.97% drop on Thursday.
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If you’re on the lookout for buying opportunities while asset prices are down, here are some considerations from financial advisors.
Market Timing is ‘Impossible’
During declines in asset values, online discussions—especially within forums like Reddit—often focus on whether to “buy the dip.” Investors generally aim to purchase at lower prices, anticipating a recovery that would yield future gains.
While acquiring cheaper investments isn’t inherently wrong, experts caution that implementing this strategy can be complex, as nobody can accurately predict stock market movements.
“We never advise clients to try and time the market, largely because it is impossible to do so without a bit of luck,” explained certified financial planner Eric Roberge, CEO of Beyond Your Hammock in Boston.
Instead, it’s advisable to “adhere to a well-defined, rules-based investment strategy that guides you toward your long-term objectives,” he suggested.
Maintain a ‘Disciplined Approach’
When purchasing assets during a downturn, a “disciplined approach” is essential, according to CFP Jay Spector, co-CEO of EverVest Financial in Scottsdale, Arizona.
For instance, some investors may choose to hold cash while awaiting the lowest prices. However, experts warn that predicting market bottoms is fraught with difficulty.
Remaining on the sidelines can be detrimental since the most significant gains often occur after substantial dips, as research from Bank of America indicates.
Rather than attempting to pinpoint the market low, you could consider “dollar-cost averaging.” This strategy involves investing your money at predetermined intervals, allowing you to take advantage of lower prices while mitigating risk, Spector stated.
