Standoff Between Preventing Loss or Buying the Dip

Should You Buy on Dips or Place a Stop-Loss to Avoid Bigger Losses?

Deciding whether to buy on dips is challenging. Using a stop-loss to avoid bigger losses is also difficult, even for seasoned investors. One analyst may view every dip as a buying opportunity. This analyst believes that purchasing stock at a lower price will lead to higher profits. In contrast, another analyst may fear that the stock is on a downward trajectory. This analyst might choose to sell to prevent further losses.

If the market rebounds after the dip, the first analyst could claim success for buying at a lower price. If the dip turns into a bear market, the second analyst will claim victory. They might say that selling early was the smarter move.

So, who is right?

Both strategies have their merits, and the right choice depends on your individual circumstances. Understanding the market, your investment goals, and your risk tolerance is key to making informed decisions. You might decide to buy on dips, or you could use stop-loss orders. My general sentiment is good long-term ETF, mutual fund or sector, I prefer to buy on dip and hold. A stock, especially a stock that I purchased on speculation, hoping for big returns I tend to have stop loss on. However, I tend to monitor them closely, if the stock turns back on me, I may re-buy, using a stop-buy order. Staying informed is crucial. Be prepared to adapt your strategy for investment success.

This is why the second pillar of investing prodigy focuses on creating your investing plan, so you are not easily swayed. You have done your homework and are not panicking during downturn.