How to buy the dip

Markets have managed to recover from all manner of shocks in recent years, be it the recent outbreak of conflict in the Middle East, last year’s trade tariff announcements, the interest rate rises of 2022, and even the Covid-19 lockdown era.

That has in turn popularised the concept of buying the dip, where investors simply top up on their market exposure in the moments of greatest volatility.

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Buy the dip may well not work forever, but those who do wish to adopt such an approach might wish to consider the options on offer.

It’s also worth noting that having some cash on the side beforehand is useful for those wishing to buy the dip in the first place.

The broad brush, and its drawbacks

Investors might want to keep things simple and get a very diversified form of exposure to equity markets, which should normally have the strongest rebound. 

That can come via funds with a good spread of exposure: think an MSCI World tracker, or an active fund that diversifies heavily such as F&C Investment Trust Ord or Alliance Witan Ord.

There are, however, some drawbacks here. 

Such funds are not as global as we assume, given their US-heavy nature, and buying the dip using such funds would have seen investors miss out on much of the most recent resurgence for Asian and emerging market shares.

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There are therefore some alternatives. A FTSE All World tracker gives some exposure to the likes of the emerging markets, with that index including Taiwan Semiconductor Manufacturing Co Ltd ADR among its top constituents. But this exposure is pretty limited, even if it has more room to grow.

Investors might therefore want to favour funds with a wider reach. We recently noted that, of the big global active funds out there, the likes of Ranmore Global Equity D GBP, Artemis Global Income I Inc, AVI Global Trust Ord, Scottish Mortgage Ord and Murray International Ord all have a decent level of exposure to this region. 

Investors could also use an emerging markets tracker to add some dedicated exposure.

Contrarian moves

Another way to buy the dip is to be very targeted and dive into markets, sectors or specific funds and shares that have suffered the most. 

Investors who bought into US smaller company funds when markets sold off on the back of April 2025 trade tariff announcements would have done very well, for example.

In the case of the sell-off in March this year, we saw funds focused on precious metals such as gold sell off, with bonds also struggling on the back of fresh worries about inflation and higher interest rates.

This is a much more high-octane approach than the broad-brush option, with investors taking on bigger potential risks and rewards. 

Note, for example, that precious metals such as gold have yet to show convincing signs of a recovery since March, possibly because valuations were so high when the sell-off took hold, while bonds have continued to suffer.

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One version of this strategy would be to monitor investments that already have substantial price momentum, given that these can suffer big falls when markets falter. 

We have seen this many times with the US tech giants, and in March high-flying regions such as South Korea briefly struggled before regaining their poise. But as gold has demonstrated recently, this approach is not guaranteed to pay off.

Building a watchlist

A targeted approach that builds in a degree of caution would be to develop a watchlist of promising funds or shares that you would buy, were they to trade on a lower price. 

Nimble investors could use moments of volatility to buy into funds that otherwise look solid in the hope of a recovery.

Sometimes the recovery could be quick: Artemis Global Income had a sharp dip in early March as markets tanked more broadly but has returned pretty aggressively to form since then, for one.

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Investors taking this approach might need to tread carefully and avoid buying something that is already experiencing problems of its own unrelated to the broader market sell-off. 

A good example here is private equity beast 3i Group Ord: the trust’s latest trading update blamed conflict in the Middle East for some of the problems at its main holding, Action, but the shares had already begun something of a downward spiral since late 2025.

On a related note, in the investment trust space, budding bargain hunters might keep an eye on favoured potential holdings and wait to see if the share price discount blows out.

But once again, the biggest moves do often come based on specific problems at the trust rather than just market moves. 

Investors may therefore be saddled with the task of weighing up a change in outlook for a potential investment.