‘Buy the dip’ might be the worst advice you’ve ever heard

RECENTLY, whenever stocks fall, headlines claim a dip-buying army will stop the slide and ride a rebound to profits. Unfortunately not.

“Buy the dip” claims say more about current sentiment than success. Heeding them leads to poor returns in bull or bear markets. No matter what you foresee for 2026 stocks, this tactic won’t help you.

Buying the dip typically requires hoarding cash to snap up falling shares. But as my Aug 4 column noted, holding excess, low-returning cash in bull markets is a big opportunity cost. Inflation eats away at it, too. It is a drag on returns – one that grows larger over time due to compound growth.

Beyond cash, there is also margin debt. Some borrow to buy dips, with the leverage juicing gains. The main problem with this is that borrowing boosts costs via interest.

Another problem: what if you are wrong and markets fall further? Investing with borrowed money magnifies declines and often leads to forced selling via margin calls. Buying the dip on margin is an exercise in overconfidence.

And all that is in bull markets.

One reason “buy the dip” is so popular is that few recall deep, long, emotionally draining global bear markets – the kind driven by global business cycle recessions. The last such bear market ended in 2009 – nearly 17 years ago.

A 35-year-old investor now would have been in secondary school then. It has been so long ago that many people have convinced themselves dip-buying prevents bear markets. But that is just a twist on an old fallacy – that flows in and out of stocks dictate market cycles.

This is nonsense. You know that for every buyer, there is a seller – always.

Need more evidence? In February 2000, US investors plowed US$50 billion net into equity funds – and added more thereafter. The roaring 1990s’ bull market peaked the next month. Then, after two awful years, US investors withdrew a vast US$55 billion in July 2002, selling down through early 2003. But a bull market started in October 2002. The same happened around 2009’s low.

Today’s global bull market was born in October 2022. That quarter – and in five of the next eight quarters – Singapore investors were net sellers of local stock funds. Cumulatively, they have sold more than bought since the low. Yet, the Straits Times Index rose 27 per cent in the eight quarters after the low – and 64 per cent overall.

In 2025, Brits pulled billions from equities in the six months to November. Yet, UK stocks gained 25 per cent in Singapore dollars in 2025 – leading the world. Clearly, fund flows never determine market direction.

In bear markets, the only dip-buying that “works” is the last one. But in normal, big, nasty bear markets, the road to it has many potholes, with the most terrifying coming last. You could buy dips all the way down, burning through cash – until the bottom, when huge swings scare you out of stocks or trigger margin calls.

Of course, if you regularly time dips accurately near the lows, you will outperform. But are you a great market timer? If you are, you do not need advice from me. But the huge majority of people aren’t. Warren Buffett isn’t. Sir John Templeton wasn’t. I’m not, and I’ve been successfully managing money professionally for over 50 years.

I call the market The Great Humiliator (TGH) – a nefarious beast seeking to impoverish as many investors as possible.

Emotions are TGH’s tools. Most people buy stocks when they feel good about their prospects, like in 2000. They sell when they feel fearful such as after a drop, like in 2009. The bigger the dip, the bigger the fear.

Poor timing is hugely costly. Since daily total return data started in 1994, the narrow MSCI Singapore annualised 4.4 per cent through to the end of 2024. Not great!

But if you missed the 10 best days in that span, you annualised a 0.1 per cent decline. Missed the 20 best days? It would have resulted in an annualised 2.8 per cent decline.

Of course, the small Singapore market’s concentration in real estate and finance skews this. But look globally and you see the same.

The MSCI World stock index annualised 7.7 per cent in the same 30-year span. Miss the 10 best days? Your return falls to 5.6 per cent. Miss the 20 best and it is 3.5 per cent.

Many of these best days came near the worst, complicating timing. Again, much as people say they buy the dip, most people don’t do it when the best time arrives. TGH spooked them and kept them sidelined.

Here is the good news: There is no reason to try.

Investing isn’t about short-term timing. It is about diversifying globally, being patient and letting compound growth work its magic. Logic says drop the “buy the dip” illogic.

The writer is the founder, executive chairman and co-chief investment officer of Fisher Investments, an independent investment adviser serving both individual and institutional investors globally.