What Is Buy the Dip?
Buying more of an investment after its price has fallen, on the belief the decline is temporary.
The Full Definition
"Buy the dip" describes purchasing more shares after a price decline, on the belief the drop is temporary and the asset will recover. It can be a sound, disciplined strategy when applied to fundamentally strong, diversified investments during normal market volatility — effectively a form of dollar-cost averaging. It becomes risky when applied indiscriminately to declining individual stocks without understanding why the price fell, since not every dip is a buying opportunity — some declines reflect a genuine, lasting deterioration in the business.
Real-World Example
An investor who adds to their S&P 500 index fund position during a 15% market correction is buying the dip in a way supported by history. An investor who keeps buying a single declining stock without asking why it keeps falling is doing something riskier.