"Buy the dip" is just code for "stay invested." Obviously most people aren't sitting on piles of cash.

> "Buy the dip" is just code for "stay invested." Obviously most people aren't sitting on piles of cash.

Not really. It's literally a call to action to counter what the market is doing, in hopes that it can prevent and recover trends. They are literally telling others to buy when everyone around them is selling.

My two favorite trading terms: “catching a falling knife” and “dead cat bounce”. You don’t want to buy until you’re sure it’s reached bottom. So you look for signs of rebound, but you can be fooled by a dead cat bounce. Because if dropped from high enough, even a dead cat will bounce before coming to rest.

Being able to do the opposite of what others do is a useful quality to have as an investor.

I don't tell random people to "buy the dip" because I don't want to be responsible for the myriad dumb ways people interpret that advice, but it's not at all an unreasonable thing to say to someone who knows what they're doing.

> Being able to do the opposite of what others do is a useful quality to have as an investor.

Textbook example of survivorship bias.

> To be honest, “buy the dip” is generally cope that people tell themselves.

I don't think so. "Buy the dip" is a call to action to third parties to irrationally invest their resources in a way that benefits you personally. It's a call to not believe what they are seeing, and that doing the opposite of what would be prudent or reasonable is somehow something that is in their best interests.

You already hear fantastic claims like "buying the dip is what rich people do to get rich". Yeah, buy low-sell high is good business. But that only works when you actually buy low. If you buy in when the freefall starts, aren't you buying high? How is that good business?

Buy the dip is what rich people do to get richer.

Rich people already had their money invested.

To buy the dip you need liquid cash sitting around earning very little, hoping the market goes down.

Reallocate portfolios if that makes sense, but much of the “buy the dip” stuff implies good market timing: To do it in meaningful amounts you’d have to pick the right times to not invest, accumulating cash at a lower rate, then you’d have to know precisely when to invest it again, switching it back into the stock market.

> Reallocate portfolios if that makes sense

Yes. This is one of the reasons 80 stocks / 20 bonds is a common strategy. The rebalancing "forces" you to buy low and sell high.

When stocks dip, your portfolio might become unbalanced at 70/30, so you reallocate funds to buy stock bringing you back to 80/20. Conversely, if stock market soars, you might get to 90/10, and selling stocks would bring you back to 80/20. Performing this balancing is, in effect, "buying the dip"

Survivorship bias