facebookFor stocks with strong fundamentals, many have said to buy the dips. The market has been dipping this week, any advice on when we should actually stop buying the dips (as it keeps dipping)? - Seedly
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Qiiiurious07

Posted on 13 May 2021

For stocks with strong fundamentals, many have said to buy the dips. The market has been dipping this week, any advice on when we should actually stop buying the dips (as it keeps dipping)?

Stocks with strong fundamentals

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6 answers

Discussion (6)

Jovan Lai

Jovan Lai

Level 13. Grandmaster

Updated on 13 May 2021

You need a plan on when to add. I personally split up funds I want to invest into a company/ETF into 3-4 sums. Each time it hits a "buy point", I add in an allocated amount of funds.

There are many ways to determine a "buy point". Some prefer to use intervals based on how much a stock would drop. That also depends on the volatility of the company.

Examples

Defensive stocks like KO/PEP/PG or index ETFs like S&P500

a 5-7% drop may be compelling an attractive enough to add more.

For other growth stocks like AAPL or MSFT maybe they may add only if it drops

10% and add again if it drops another 10%.

Extremely volatile stocks like ARKK or TSLA maybe a 20-25% interval may be more suitable

Personally

I personally use moving averages to guide me

For any asset, be it stocks, ETFs, Bonds, Crypto... You can see that in an uptrend, it tends to respect a moving average as a support before boucing up. They are called averages for a reason. These can serve as potential buy points to add. Ofc, each stock tend to respect one moving average over another more often than not. You have to look at the history of the price action for each individual stock.

*Not always exactly, but roughly in that area. (We should see area of supports as areas instead of a single price point)

*The purpose of of this sharing is to give a different perspective on averaging your entries for those who prefer not to DCA, this is not an opinion to say one strategy is better than another. One strategy or investment may be great for an indivdual but terrible for another due to different personalities and emotions, it is best to understand yourself and which style suits you best.

0

Post

Found this article on investing in "market crashes".

I quote:

"More specifically, I buy companies on my watch-list in tranches. There is no rule to this and I deploy my available funds based on probability of these events happening:

  • 20% market decline: Likelihood of occurrence is 15%, I will deploy 50% of my available funds at this stage

  • 30% market decline: Likelihood of occurrence is 8%, I will deploy 30% of my remaining funds at this stage

  • 40% market decline: It has only happened 3 times since 1950, I will be fully invested by this point.

Apart from deploying my available cash, I would also be selling lower-quality stocks in my portfolio and buying high-quality companies as the market throws them out. High-quality growth companies and cheap/ reasonable valuations seldom come hand-in-hand. So when the market gives you the opportunity to be an owner of these companies, pounce on them!"

2

Qiiiurious07

13 May 2021

Don't mind my ignorance as i'm still new to investing, from where can we identify the % of market decline?

Zac

Zac

15 May 2021

You can choose an index that you use to represent the market you're buying into. the index measures the entire market's performance. sort of like a score card. https://www.investopedia.com/terms/i/index.asp

Post

If you believe in the stocks and you have dry powder to deploy, you can continue to buy the dips. Yo...

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