This has certainly been the year for investors who want to try their hand at the “buy-the-dip” strategy. Even if you missed the most recent opportunity to take advantage of fire-sale prices on stocks, you’ll likely get another shot. (See also: Ongoing market volatility.)
Are you ready? Like, really ready? Because jumping into a falling market isn’t as easy as it seems. As James Royal, Bankrate’s principal investing writer, says, “The hardest thing about buying the dip is not the issue of having the money at the ready — it’s having the nerve to do so when your instincts are flashing warning signals.”
Advance preparation — including a well-defined plan of action with specific steps to follow when the market takes a downturn — will help ensure you’re ready to act when the time comes. A financial advisor may be able to help you devise such a plan that fits with your long-term goals. Here are five more tips to ensure you’re ready for the next fall.
1. Get your financial priorities straight
Before you earmark money to buy the dip, consider your larger financial picture.
Market turmoil can be triggered by broad economic uncertainty and also exacerbate those uncertainties. Fears of recession, stagflation, a weakening job market and other macro factors don’t just affect portfolios — they touch all areas of people’s lives.
Taking advantage of a bargain sale on stocks should only come after you’ve taken care of a few financial basics.
- Reinforce your cash cushion: If you don’t have money set aside to cover emergencies (think job loss, pricey home or car repairs, medical bills), make that a priority. The money should be in a high-yield savings account where it can accrue interest. The stock market isn’t a reliable short-term piggy bank; if you need to cash out investments to access your cash in a pinch, you risk having to sell at a loss.
- Don’t pause or pull back on paying off high-interest debt: Paying down debt isn’t as exciting as snapping up cheap stocks. But you’d need to earn exceptional investment gains to offset the impact double-digit interest rates have on your overall net worth. Although the market historically provides positive long-term returns, they take place over decades and are not guaranteed. In contrast, paying off debt offers a guaranteed return equal to the debt’s interest rate.
- Focus on long-term gains: Buying the dip may be a favored strategy for day traders seeking quick, short-term profits. But active trading ends up hurting most investors’ returns. The better approach is to reframe your thinking — to buy the dip, but hold for the long-term. Buy great companies when they’re cheap and ride them out to even higher long-term gains over time.
Juggling multiple financial goals?
A financial plan provides a roadmap to help you prioritize and achieve them. Use Bankrate’s financial advisor matching tool to find a pro to help you map out a plan.
2. Make sure your cash is ready to deploy
After you’ve earmarked money for buying opportunities, move it into your brokerage account so that it’s ready to put into play. (Don’t have a trading account yet? Here are Bankrate’s picks for the best online brokers for 2025.)
Moving money in advance is important since transfers can take anywhere from two to seven business days to clear, or even longer for new accounts. When the market starts dipping, you’ll need to be ready to pull the trigger.
The easiest way to transfer money into your brokerage account is via an electronic funds transfer from your checking or savings account. A wire transfer may be zippier, but you may incur a wire transfer fee from your bank (for an outgoing transfer) or the broker (for the incoming wire).
Need a same-day transfer?
Some investment apps (such as Firstrade, Robinhood and Webull) offer customers instant deposits when initiating a transfer from a linked and verified bank account. Typically, they provide up to $1,000 in instant buying power until the official transfer goes through.
3. Assemble an investment wish list and set up alerts
When the market swoons, a lot of things start happening at once. Having a shopping list of investments that align with your wants and needs beforehand helps you filter out distractions and remain focused on buying opportunities that serve your long-term goals.
Some tips to consider as you prepare your crisis investing plan:
Need help winnowing your wish list? Consider scheduling a portfolio review with a fiduciary financial advisor to identify any holes or over-exposure in your investment mix.
4. Engage autopilot to override your jitters
The text alerts about price drops start dinging and your first instinct is to … freeze. (Samesies, FYI.) Doing nothing is exactly what you should do if your only other alternative is to panic-sell while the market is tanking.
But if your aim is to buy the dip, then it’s go time. If your brain decides to ignore the memo, you’ll need a workaround. Here’s where automation helps.
“Setting up an investment plan that you will execute regardless of what’s happening in the market gets your emotions out of the process,” says Royal.
Limit orders are a useful tool you can set up in advance to execute a trade when a stock reaches a price you specify. Your order will only be executed if the stock falls to or below the price during your desired timeframe (whether a week, a month or until you cancel the order).
Automation can also help keep investors from giving in to panic and selling into the dip when stock prices fall. Setting up a regular set-and-forget buying plan — investing a fixed amount on a weekly or monthly basis like you do with each paycheck in your 401(k) (also known as dollar-cost averaging) — is a passive way to get in on the “buy the dip” action. And if you invest in companies that pay a dividend, you can flip the switch in your brokerage account to automatically reinvest dividends to purchase more shares.
5. Be ready, but don’t be in a rush
You don’t have to cannonball into the market with all your money when prices start to drop. “The stock market is a ship that can take a while to turn, so you can typically space out your purchases over a few months and still reap the benefits of a dip,” Royal says.
If you’re kicking yourself for missing the most recent sale on stocks, don’t. Consider that after the bear market of 2022, stocks declined for most of the year but still took several months to definitively hit the bottom. Opportunistic investors had plenty of time to buy when prices were near their lows without missing the move higher in 2023.
Here, too, it helps to put in place rules about how you’ll put your opportunity funds to work. For example, if you’re keeping $5,000 in reserve, set up a rule to invest $1,000 when the market is down 10 percent, an additional $2,000 when the market is down 15 percent and the remaining $2,000 when the market dips 20 percent.
In other words, you don’t have to have perfect timing to successfully “buy the dip.” A better approach is to buy the dips — plural.
Bottom line
Preparing to buy the dip is not just about having available funds; it’s about being mentally and financially ready to act calmly and strategically during market downturns. Going in with a plan — ready cash, an investment wish list, a long-term outlook and pre-set rules to ease into a falling market — is the key to making the most of opportunity when it arises.
Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.
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