Buy the Dips? well, it depends.
A few weeks ago, I was in a Clubhouse room listening to investors, crypto heads, NFTs enthusiasts and many others movers and shakers talk about investment strategies, misinformation in todays crypto world, what are the best currencies to trade, and their take on the government printing money. In the midst of the conversation, a lady asked a very interesting question, which was answered with “Well, it depends.” Mr. Tai Lopez, a serial social media marketer and investor, whom I have been a bit skeptical of at times, was the person to respond.
He went on to say that he now answers most questions with “It depends” because he read that a very wise person said that if someone answers your question with a cold, definite answer, they may not know, or have not studied the topic of discussion enough to realize that all questions have many answers depending on when, where, and by who is asked.
So, i have taken that approach and to respond to the question, “Should we buy the dip?”
“Buy the dips” means purchasing an asset after it has dropped in price. The belief here is that the new lower price represents a bargain as the “dip” is only a short-term blip and the asset, with time, is likely to bounce back and increase in value.
I have to say that it depends on your present financial situation, when will you need the money to be invested, how much you have to be invest and your tolerance for risk. Well, that, among many other things.
For example, Bitcoin’s volatility can reach up to 5% during turbulent times, compared to 1.2% of the gold’s volatility and 0.3–0.5% of fiat currencies. Five percent can be way too much to stomach for certain people, to see your money drop 5 or more point in a give second can be detrimental to some people’s health. So knowing yourself is very important. Also some key takeaways (from investopedia) from “Buying the Dips” are:
- Buying the dips refers to going long an asset or security after its price has experienced a short-term decline, in repeated fashion.
- Buying the dips can be profitable in long-term uptrends, but unprofitable or tougher during secular downtrends.
- Dip buying can lower one’s average cost of owning a position, but the risk and reward of dip-buying should be constantly evaluated.
In summary, in a extreme volatile market, as the cryptomarket, buying the dip can be profitable if one is to hold for the long term. The market may dip again and you may either hold even if it drops below your purchasing price or you can sale to buy at a lower price. But there is no definite answer to this or any question. The answer depends on your personal circumstances, your personality as in tolerance for risk, and your expectations for your investment. It is interesting to hear or read people promote the “Hodl” strategy, but if you are investing, your goal is to enjoy your profits at a later time, hence you cant hodl forever. At one time you may want to enjoy your gains… Am i correct? Hold as long as you can, buy also enjoy your life while you can, because as we have seen during this pandemic, we all have an expiration date, and thats not negotiable or tradable.
So long…
