Here’s What You Should Do in a Market Dip

It’s really hard to talk about retirement planning without talking about investing. Because  interest rates on even high-yield savings accounts won’t help your money keep pace with inflation, the only real way to grow your money is to invest it.

Any talk about investing generally leads pretty naturally into thinking of ways to beat the stock market. Day trade? Pick the right stocks? Buy and hold? Buying the dip is a perennial favorite, and for good reason. After all, you’re buying on sale, right? It’s the first part of that investing chestnut: buy low, sell high.

Buying the dip flies in the face of dollar-cost averaging — which basically says a strategy of consistently and steadily dripping your money into the market is the best way to go. Looking for opportunities in a down market, on the other hand, says, “I see a bargain and I’m grabbing it! I CAN time the market!” While there’s nothing wrong with snatching up a good deal, you can’t accurately time the market.

It’s good to remember how Warren Buffett and the other Berkshire Hathaway executives make market decisions: “We’ve not been good at timing [the market],” Buffett said at his annual shareholders meeting in April. Instead, he likes to research a company and buy based on performance and the company’s value relative to its price. (Uncomfortable aside here: Buffett admits that he lost billions of dollars by not buying stocks at bargain basement prices in March 2020.)

For more, see what reporter Mallika Mitra says about the pros and cons of buying the dip lately, and how this method stacks up against other investing approaches.