What does it mean to buy the dips?

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If you’ve been investing for some time, you’ve probably heard of people saying you should buy the dips. How much of a dip should you buy? A dip of 3%, 5%, 10%, 20%, or 50%?

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It depends on a lot of things. The company in question should be fundamentally sound. That is, you should have determined that it’s a quality company to invest in.

Moreover, depending on the type of industry the company is in, investors might require a bigger or smaller dip from the stock. It’s normal for stocks to move up or down as much as 3% on a given day. When it’s earnings season, stock prices can be even more volatile.

Most importantly, investors should consider the valuation of the company. If a stock is overvalued, and it had bad results in a quarter or multiple quarters, the stock will be hit hard.

An example

Take a look at Cineplex Inc. (TSX:CGX). The stock is nearly 35% lower than it was a year ago. In 2013 to 2017, the stock was trading at high multiples, but it wasn’t growing at a high pace. Perhaps buyers at the time felt they were paying up for quality. However, with the correction that the stock has had, it indicates that growth rates are

Article source: http://www.msn.com/en-ca/money/topstories/what-does-it-mean-to-buy-the-dips/ar-AAuB92V?srcref=rss