Should you ‘buy the dip’ when the stock market is down? What to know

After weeks of stock market declines amid the US-Iran conflict, some traders could also be eyeing an opportunity to “buy the dip,” or buy belongings at briefly decrease costs, which may provide increased returns when the market rebounds. But the transfer carries dangers, some advisors say.

Buying the dip was popular among retail investors throughout key market drawdowns in 2025. But the trend has slowed since the begin of the Middle East battle.

The technique “sounds great, but timing it is really hard” since nobody can predict future market strikes, mentioned licensed monetary planner Joon Um, managing proprietor of monetary agency Secure Tax and Accounting in Hayward, California.

If you’re experiencing “FOMO” — worry of lacking out — about shopping for alternatives throughout the present downturn, Um mentioned, remember the fact that “missing one dip won’t hurt you, but making an emotional decision might.”

The Dow Jones Industrial Average on Friday closed nearly 800 points lower at 45,166.64, whereas the S&P 500 shed 1.67% and fell to a seven-month low, ending the session at 6,368.85. The tech-heavy Nasdaq Composite dropped 2.15%, sliding to 20,948.36.

There was some market aid Monday after comments from Federal Reserve Chair Jerome Powell calmed traders’ fears about an rate of interest hike triggered by rising energy prices.

In a Truth Social post earlier Monday, President donald trump mentioned that “[g]”reat progress has been made” in Iran negotiations, however he threatened to destroy the country’s oil infrastructure if a peace deal does not occur “shortly.”

The S&P 500 ultimately closed lower on Monday, bringing it closer to correction territory, down about 9% from its 52-week intraday high. But stock futures were higher Tuesday morning after The Wall Street Journal reported that Trump said he was willing to end the war even if the Strait of Hormuz remained mostly closed.

During a market drawdown, some investors panic-sellwhile others seek discounted assets. If you fall into the latter category, it may be tempting to quickly dump cash into investments for longer-term goals, such as your retirement.

But typically, the strategy works best as part of a broader plan, according to Jon Ulin, a CFP and managing principal of Ulin & Co. Wealth Management in Boca Raton, Florida.

In some cases, investors maintain a certain level of “dry powder,” or cash for buying opportunities, which can be used for specific assets at predetermined prices. Ulin recommends doing this with a diversified portfolio, rather than a single stock or assets such as gold or bitcoin.

But “success requires self-discipline,” Ulin said. These purchases should always “match a long-term plan slightly than a short-term response” to market volatility, he said.

Of course, hoarding cash while waiting for rock-bottom prices before entering the market can also be risky, experts say.

There’s a cost to missing the market’s best-performing dayswhich often closely follows the worst days, according to JPMorgan Asset Management research.

If you’re currently sitting on a larger lump sum, Ulin recommends “dollar-cost averaging,” or investing fixed amounts during set intervals, over three or four months rather than “ready on the sidelines for readability that not often arrives.”