Buying dips

It seems to me that instead of building a portfolio and staying long, you have to be buying and selling all the time – otherwise there is ultimately no cash to buy these dips you keep referring to.

If you keep buying dips, eventually there is nothing left unless you are selling things from time to time to create cash. What is your response to this, remembering I am trying to build a portfolio and stay long. It seems to me your theory requires one to be a trader or have a money tree at the bottom of the garden.

A: Thanks for the question.

I am certainly not trying to suggest that you have to be a trader, or for that matter, have a money tree. That said, I can see where you are coming from.

When I talk about buying in dips, the funds could come in the following situations:

  • Most funds in accumulation phase have continual income to invest – new contributions, interest and dividends from existing investments etc;
  • Australian shares make up (for most funds) just a part of their super fund – so the money could come from another asset class if you are underweight Australian shares;
  • Or if you are not fully invested, then this would be a good time to move money out of cash into shares.

Obviously, if you are already fully invested and have no cash, you can’t buy the dip. However, if the situations above apply, then what I am saying is that this is a good opportunity to buy Australian shares.


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