BUY ON DIPS is becoming a popular investment strategy.
This strategy has the potential to bankrupt you.
Some important points you should definitely consider
👇👇
This strategy has the potential to bankrupt you.
Some important points you should definitely consider
👇👇
1/Buy on Dips simply means that you are averaging down your position on a stock/asset.
For example: If you buy ITC at 220, then if it falls to 200, you buy some more. And you keep doing that with every fall.
For example: If you buy ITC at 220, then if it falls to 200, you buy some more. And you keep doing that with every fall.
2/A stock can potentially go to zero.
Don't believe me?
Consider Reliance Comm -- at one point the stock was trading at INR 845, now it is trading at INR 3.60
Here is a chart from @TickertapeIN:
Don't believe me?
Consider Reliance Comm -- at one point the stock was trading at INR 845, now it is trading at INR 3.60
Here is a chart from @TickertapeIN:
3/If you are catching a falling stock, some logic should be used.
Example: Top AMC stocks (eg. HDFC AMCs) have corrected by ~25% in a month. Should you buy the dip?
Well, some logic:
- Deeply under-penetrated industry
- Sticky product
- High OPM
[Not a recommendation]
Example: Top AMC stocks (eg. HDFC AMCs) have corrected by ~25% in a month. Should you buy the dip?
Well, some logic:
- Deeply under-penetrated industry
- Sticky product
- High OPM
[Not a recommendation]
4/It is impossible to guess the stock price.
So don't end up investing insane amount of money on 1 single stock (no matter how strongly you feel about it).
One wrong move and you might have to take a forced retirement from the market.
So don't end up investing insane amount of money on 1 single stock (no matter how strongly you feel about it).
One wrong move and you might have to take a forced retirement from the market.
5/ Don't make buy on dips an ego issue.
Anyone can be wrong about a stock/firm. Valuing businesses is highly complex.
If you are wrong about a stock, cut your losses and move on.
You don't need to 'buy the dip' just to prove that you are right.
Anyone can be wrong about a stock/firm. Valuing businesses is highly complex.
If you are wrong about a stock, cut your losses and move on.
You don't need to 'buy the dip' just to prove that you are right.
6/Summary:
Buy on dips for retail investors would work well:
- On good assets.
- Not taking excessive investment on 1 single stock.
- Not making it an ego issue.
Buy on dips for retail investors would work well:
- On good assets.
- Not taking excessive investment on 1 single stock.
- Not making it an ego issue.
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