Should Investors “Buy the Dip”?

TL;DR

Holding cash to buy the dip is a bad strategy because stocks rise 3x more often than they fall, making the wait too costly.

Key Points

• 1.Opportunity cost kills the strategy: Stocks historically rise roughly 3 periods for every 1 period they fall, so cash held waiting for a dip often just misses prolonged gains.
• 2.Bear markets make it backfire: Investors typically spend their "dip cash" on the first drop entering a bear market, becoming fully invested right before prices fall much further.
• 3.The Catch-22 problem: Once you deploy cash on a dip, you have no cash left — and there's no clear trigger for when to start rebuilding that reserve.
• 4.Psychology prevents execution: Most investors who held cash during April 2025's dip didn't deploy it because the scary headlines that *caused* the dip also scared them away from buying it.