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After weeks of stock market declines amid the U.S.-Iran conflict, some traders could also be eyeing an opportunity to “buy the dip,” or buy belongings at briefly decrease costs, which might provide increased returns when the market rebounds. But the transfer carries dangers, some advisors say.
Buying the dip was popular among retail investors throughout key market drawdowns in 2025. But the trend has slowed since the begin of the Middle East battle.
The technique “sounds great, but timing it is really hard” since nobody can predict future market strikes, stated licensed monetary planner Joon Um, managing proprietor of economic agency Secure Tax and Accounting in Hayward, California.
If you’re experiencing “FOMO” — worry of lacking out —about shopping for alternatives throughout the present downturn, Um stated, remember the fact that “missing one dip won’t hurt you, but making an emotional decision might.”
The Dow Jones Industrial Average on Friday closed nearly 800 points lower at 45,166.64, whereas the S&P 500 shed 1.67% and fell to a seven-month low, ending the session at 6,368.85. The tech-heavy Nasdaq Composite dropped 2.15%, sliding to 20,948.36.
There was some market reduction Monday after comments from Federal Reserve Chair Jerome Powell calmed traders’ fears about an rate of interest hike triggered by rising energy prices.
In a Truth Social post earlier Monday, President Donald Trump stated that “[g]reat progress has been made” in Iran negotiations, however he threatened to destroy the country’s oil infrastructure if a peace deal would not occur “shortly.”
The S&P 500 ultimately closed lower on Monday, bringing it nearer to correction territory, down about 9% from its 52-week intraday excessive. But stock futures have been increased Tuesday morning after The Wall Street Journal reported that Trump stated he was willing to end the war even when the Strait of Hormuz remained principally closed.
Buying the dip for longer-term objectives
During a market drawdown, some investors panic-sell, whereas others search discounted belongings. If you fall into the latter class, it could be tempting to rapidly dump money into investments for longer-term objectives, comparable to your retirement.
But usually, the technique works greatest as a part of a broader plan, in accordance to Jon Ulin, a CFP and managing principal of Ulin & Co. Wealth Management in Boca Raton, Florida.
In some instances, traders preserve a sure degree of “dry powder,” or money for getting alternatives, which can be utilized for particular belongings at predetermined costs. Ulin recommends doing this with a diversified portfolio, relatively than a single stock or belongings comparable to gold or bitcoin.
But “success requires discipline,” Ulin stated. These purchases ought to all the time “fit a long-term plan rather than a short-term reaction” to market volatility, he stated.
Of course, hoarding money whereas ready for rock-bottom costs earlier than getting into the market may also be dangerous, specialists say.
There’s a cost to missing the market’s best-performing days, which frequently intently comply with the worst days, in accordance to JPMorgan Asset Management analysis.
If you’re at the moment sitting on a bigger lump sum, Ulin recommends “dollar-cost averaging,” or investing fastened quantities throughout set intervals, over three or 4 months relatively than “waiting on the sidelines for clarity that rarely arrives.”
