Market volatility can mean bargain prices for investors, but there’s more to buying the dip than just buying low.
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Updated · 3 min read Written by Managing Editor+ more + more Edited by Head of Content, Investing & Taxes Co-written by Lead WriterWhen the U.S. stock market dips, it doesn’t have to mean doom and gloom for long-term investors. Rather than selling off, stock market dips can be a time to remain steadfast in your investments. For investors with a long runway to retirement, a downturn (like what we saw in April 2025, when concerns about the newly imposed tariffs made stocks take a dive) can also signal an opportunity to “buy the dip,” or buy in at bargain prices. For those looking for short-term returns, volatile markets make no guarantees that the dip will rebound fast enough to turn a profit.
'Buy the dip' meaning
“Buy the dip” is an investment tactic that follows the basic principle of “buy low, sell high,” but with a slightly more targeted approach. There are two requisites for buying the dip: a sharp decline in stock prices, and a strong indication that they’ll rise again. One of the more common examples of this is when a large corporation’s stock price drops suddenly due to broad market fears, rather than concerns about the company’s long-term performance. To be clear, no one knows when the bottom hits, and trying to time the market is never a good idea. That being said, there are plenty of opportunities to invest in stocks during down periods if you’re ready to invest for the long term — and you know where to look.
How to buy the dip
1. Look at sectors hit hardest during the sell-off
Broad market index funds, which track a diverse stock market index such as the S&P 500, are a proven way to invest. But this same strategy can be applied to the 11 sectors that make up an index such as the S&P 500, too.Taking a look at sectors with the largest share price declines, then analyzing the mutual funds or exchange-traded funds that track that sector, could shed light on a few opportunities to buy the dip.» Learn how to open a brokerage account» Learn
2. Look at large companies with big drops
Some blue-chip stocks that have otherwise been stable for years have been hit hard recently by a combination of rising inflation and high interest rates. Similarly, in 2024, investors began rotating out of large tech companies and into small-cap stocks. Looking for dips like those can provide an opportunity to buy into large corporations at their lowest prices in years.This strategy comes with a warning, though: Be cautious when picking individual stocks, which can be volatile and overall riskier than more diversified investments like mutual funds, ETFs or index funds.Brokerage firms
Investors may be encouraged to max out their 401(k) contributions during market dips, provided they have steady jobs and substantial emergency funds to tide them over should they need them. By upping your contribution, you’re essentially buying additional shares of investments you already own at a lower price.But even maintaining the amount you’d been contributing before the dip would net you more shares per contribution, thanks to the lower share prices. Unless you need the additional monthly cash flow, the last thing you’d want to do is cease contributions during a down period.» Learn more: This year's 401(k) contribution limits» Learn more:
4. Use dollar-cost averaging
If you have an IRA or other investment account, consider making steady investments at regular intervals, rather than a lump-sum contribution timed when you think is best. Through this strategy, known as dollar-cost averaging, you’ll continue to purchase shares throughout the dip.401(k)s illustrate dollar-cost averaging in action: A percentage of every paycheck gets invested at regular intervals over the long term. Dollar-cost averaging can be used in all investment accounts.
The buy the dip meme
The phrase “buy the dip” has gained popularity through memes — particularly in the context of volatile cryptocurrencies such as Bitcoin and meme stocks such as GameStop.But one of the most famous instances of the buy-the-dip meme illustrates the potential limitations of this strategy: On May 9, 2022, Nayib Bukele, the vocally pro-Bitcoin president of El Salvador, tweeted, “El Salvador just bought the dip! 500 coins at an average USD price of ~$30,744.”The price of Bitcoin had dropped more than 25% over the previous month. This is an extreme example of the buy-the-dip strategy.
Limitations of buying the dip
Buying the dip does not guarantee getting in at rock-bottom prices. In volatile markets, today’s floor could be tomorrow’s high. All it means is that valuations are substantially lower than they were just a few months, weeks or days ago, offering investors an opportunity to buy at that relatively low price.If you believe share prices will eventually rise to or beyond previous highs, buying at today’s lower prices could be a good strategy for generating long-term returns—you may just have to stomach a few big drops before you realize them.» Need a brokerage? View our full list of the best brokers» Need a brokerage? Neither the author nor editor held positions in the aforementioned investments at the time of publication.Neither the author nor editor held positions in the aforementioned investments at the time of publication.Article sources Article sources NerdWallet writers are subject matter authorities who use primary, trustworthy sources to inform their work, including peer-reviewed studies, government websites, academic research and interviews with industry experts. All content is fact-checked for accuracy, timeliness and relevance. You can learn more about NerdWallet's high standards for journalism by reading our editorial guidelines. Twitter. Nayib Bukele. Accessed Jun 14, 2022.About the authorsChris DavisChris Davis is a Managing Editor on the Investing team. He has passed the Series 65 (Uniform Investment Adviser Law Exam) and covered the stock market, investing strategies, investment accounts and cryptocurrency. His work has appeared in The Associated Press, The Washington Post, MSN, Yahoo Finance, MarketWatch, Newsday and TheStreet. See full bio. Sam TaubeSam Taube writes about investing for NerdWallet. He has covered investing and financial news since earning his economics degree in 2016. See full bio. Helpful resources How to Start Investing in Stocks Individual Retirement Account (IRA): What It Is & How It Works The Best Index Funds and How to Start Investing More like this Best Brokerage Accounts for Online Investing and Stock Trading in 2026 By Chris DavisBest Robo-Advisors: Top Picks for 2026 By Alana Benson, Sabrina ParysInvesting in Dividend Stocks: Guide, Calculator and Top 7 Yields for June 2026 By Chris Davis, Sam TaubeBest Brokers for Beginner Investors: Top Picks for 2026 By Alana Benson, Bella AvilaBest Investments: Where to Invest in 2026 By Chris Davis, Alieza Durana
