Is buying share on dips a good investment strategy?
When markets are down they offer investors great opportunity to buy good quality shares at discounted prices. Markets are down because there are more sellers than buyers.
In other words, buying at times when fear factor is high is not easy. Most investors fail to derive the maximum benefit from such opportunity.
At this crucial time, when markets are crashing like a pack of playing cards, they junk the idea of buying on dips. You can take help of stock advisory company to minimize your losses.
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The idea of buying when the market is low is not a bad idea. But that can backfire when moving stocks are bought on small corrections. Applying a set of reasons or giving logical basis to stocks that are on the rise does not work. Let us see that how buying on dips for moving stock works.
Market move up or down or remain sideways. They can rise or fall sometimes around 20 percent in a time period of six to nine months. If the market is up, it does not mean all shares are going up and vice versa.
You can take nifty future tips regarding buying of shares. There are few heavyweight shares that can change the direction of the market. Sometimes it is the complete sector.
Global markets are in upward momentum. They are scaling new heights every now and then. As P/E of the top companies, valuation is not cheap, compared to their historic value and their liquidity flow.
George Soros said, “Rising prices attract buyers, whereas falling prices attract sellers.” This propels a momentum in asset prices which creates a bubble on the way up.
People come to know about stocks from various sources. Like TV channels or a business newspaper. Discussing with family or friends that some stocks are performing very well.
Once they see that stock is on a constant rise they invest. Whenever a dip of 20 percent or so occurs, in a hope to make fortune as someone else did. Instead they should take advice on nifty option tips provider before venturing.
They keep track of those stocks and when there is small correction they buy it. The stock price by now has reached their peak. They forget to do the fundamental and technical analysis. At this point, they are highly overvalued. Then after peak comes the fall.
While buying they compare the dip from the present high. They fail to see overall stock prices that have been prevailing for last few years. They can diversify and take commodity tips also as one of the option.
One thing dip investors do not inquire is why the stocks are taking a dip. What should be the actual value of the stock? They take this as an entry point whereas momentum investors are existing.
The entry point of dip investor is the exit point for momentum investor. Dip investor enters at price level which is very high, and there is hardly any chance of growing further.
Certain dip investors buy at every dip. What they are doing is that they are increasing their problem.
The stock market has gone through crashes or major correction at least once in a decade. And minor correction every few years. Real estate shares tanked in 2008, tech business shares tanked in 2000, etc.
Many people have still not recovered from crashes or major correction. Which usually happen so suddenly that they do not give enough time to the investor to become stable.
Many have professionals have advice to stay away from the technique of buying on dips only. Value the share, and go for it whenever it is worth buying.