First, what does it mean to buy the dip?
Investments are sold in portions. For example, the stock of a company or the units of a mutual fund. The prices of these portions change regularly.
When there is a drop in the price of a portion (that is suspected to be short-term) a dip is said to have occurred.
Why do people buy dips?
There are various reasons but here are the top two:
- The price of a portion is cheaper.
- They expect the dipped price to rise in the future.
But sometimes, you buy the dip and it just keeps dipping. 🙃
Tips for buying dips
Understand cycles
Investments move in cycles. The prices of their portions can have upward trends, followed by downward trends. And sometimes, their prices might not even move.
Long-term view
When you buy the dip, you are positioning for a long-term objective. If you’re out for a quick price increase, stay away from buying dips. You can’t time the market.
Check the basics
Evaluate the investment before you buy a dip. Is it really backed by instruments that have a valid potential of rising in the future?
In essence, invest in actual potential not buzz. It’s hard to hold on to buzz-based investments.
Place your investments on auto-pilot
Automate your investments with a fixed amount. That way you get to buy more portions as prices dip and less as they increase.
The benefit? You spend lesser on the average than someone who buys randomly.
Submitted March 13, 2021 at 05:53AM by black-feri https://ift.tt/3crg3SD
