A trader on the floor of the New York Stock Exchange on Monday. Unless you are a stellar market timer, dip-buying yields bad returns in both bull and bear markets.CHARLY TRIBALLEAU/AFP/Getty Images
What happened to buying the dip?
In March, as Iran news hit the global stocks, pundits who ordinarily tout snapping up falling shares to ride rebounds to riches went shockingly silent. So while the MSCI Canada Index joined global markets in falling to near-correction levels, investors fearfully clung to their cash, missing the bounce.
It all highlights a crucial investing lesson: Unless you are a stellar market timer, “buy the dip” yields bad returns in bull and bear markets alike.
Dip-buying usually means holding cash to buy bargains when cheap. But holding excess, low-returning cash in bull markets is a big opportunity cost. Inflation eats away at it, too. While I doubt big inflation is imminent, even mild inflation takes a big bite. Cash is a drag. I see the bull market continuing in 2026, even without Iran clarity. Waiting for dips likely means missing gains that compound over time.
That is especially true if you don’t deploy those dollars. It is easy to rationalize sitting on your hands when war tops all headlines. But markets won’t wait. They cold-heartedly pre-price what we all watch – then move on. If you seek any success dip buying, you must think like markets – not like humans. Can you do that?
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To solve the cash conundrum, some investors borrow to buy dips – with the leverage juicing gains. The problem: Borrowing adds costs via interest. A bigger problem? Hubris. What if you are wrong and markets fall further? While I am confident of this 2026 bull market, overconfidence is toxic. Investing with borrowed money magnifies declines and may drive margin calls – forced selling – which lock in losses.
That is in bull markets. One reason “buy the dip” claims won’t die? Few investors recall deep, long, emotionally draining global bear markets – the kind driven by global business cycle recessions. The last ended in 2009 – 17 years ago – so long ago that many people foolishly believe dip-buying prevents big slides. No! That is just a twist on an old fallacy: that flows in and out of stocks dictate market cycles. They don’t. For every buyer, there is a seller. Always.
Consider: In February, 2000, U.S. investors plowed US$50-billion net into equity funds – adding thereafter. The roaring 1990s’ bull market peaked the next month.
Then, after two awful years, U.S. investors withdrew a vast US$55-billion in July, 2002, selling through early 2003. But a bull market started in October, 2002. The same happened around 2009’s low.
In 2025, Brits pulled billions from equities in the year’s second half. British stocks boomed. 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 the bottom has many potholes, with the most terrifying coming last. Headlines often tout buying dips all the way down, burning through cash. Until the bottom, when huge swings scare you from 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 so, you need no advice from me – at all – full stop. 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 more than 50 years!
I call the stock market The Great Humiliator (TGH), a nefarious beast that seeks 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 – after a drop, such as in 2009. Or this March. The bigger the dip, the bigger the fear.
Poor timing is hugely costly. Since daily total return data started in 1994, the MSCI Canada Index returned an annualized 10 per cent through March’s end. But if you missed the 10 best days in that span, you annualized a 6.5 per cent return. Miss the 20 best? Just 4.2 per cent. Less than half!
Similar results hold worldwide. The MSCI World Index returned an annualized 8.1 per cent in that span. Miss the 10 best days and your return falls to 5.8 per cent. Miss the 20 best and it is just 4.1 per cent.
In Canada and worldwide, many of the 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 times arrive. TGH spooks them out and keeps them sidelined, like now.
The good news? Whether or not recent volatility resumes, there is no reason to try timing dips. Investing isn’t about short-term timing. So drop “buy the dip” illogic. If you are bullish like me, don’t wait to buy. Then harness patience – and let compound growth work its magic.