A. Like most financial advice you might get, the answer is it depends.
If you are young and have a long investment horizon ahead, buying market dip is a great idea!
Warren Buffet wrote in 1997 that stocks are like hamburgers: if you are going to be purchasing them regularly for years to come, you shouldn't want them to go up in price. Any drop in the market is good for people who are still saving and investing for the future.
But if you are already approaching or already in your retirement, buying market dip is not a good idea at all. You need to decrease, rather than increase, your exposure to the market at this stage of life.
The reason is due to the so called "sequence risk".
What is Sequence Risk?
We have had a mini blog series discussing sequence risk before, to put it simply -
Let's say during a 30-year period, there are two market up and down sequences - one starts with down and rises toward the end; the other one starts with up but drops towards the end. Both have the same average annual rate of return, so with the same amount of money to start with, both will have the same amount of money to end with.
However, for someone like a retiree who needs to draw money regularly out of investment account to support retirement life, you can imagine which sequence will be a disaster, that is called "sequence risk".
How to deal with "sequence risk"? We will discuss in our next blog post.