Go Hurry! Buy the dip!
You must have heard this from an old uncle in a park.
But do you know what it exactly means?
Simply put, “Buying the dip” means investing in the stock market when it has fallen in the hope to book profits after it bounces back and increases in value.
Should we invest in ANY stock that declines in value?
Picking any stock randomly just acknowledging the decline; can prove to be a decision you might regret later. Do your due diligence and only invest in a stock when it witnesses a sharp decline in price and strongly indicates an ascent in the future with fewer concerns about the company’s fundamentals and long-term performance.
For instance, let’s take Nykaa.
Nykaa got listed on the stock exchange on 10th Nov’21 with its share price of Rs. 2,018.
Its price soured till 1st Dec’21 to Rs 2,493.10 and then began declining. During this time, the global markets were witnessing a sharp decline due to a sudden surge in the COVID cases globally.
Nifty at the time observed a 3% decline on Dec 20.
Due to all these scenarios playing out, I would have started investing from Dec 8 after the decline. Since predicting the extent of the decline in markets is unfeasible, I’d have invested small portions in the stock during that period.
Nykaa stock, after moving sidewards for a short while again witnessed a decline at the end of January. Sensex, Nifty, and the global markets saw this crash due to geopolitical tensions between Russia and Ukraine, increasing dollar index, and shooting oil prices.
I’d have invested in the stock from January end till mid of March as the stock price dwindled.
Keeping in mind, the fundamentals of a company and its future growth I’d keep using the “Buying the dip” strategy.