Buy the Dip?

Maybe what you are asking for is dollar cost averaging. Attempting to time the market by picking when to enter and when to exit the market is fool's errand.

These are strong words, but let us explore more about dollar cost averaging.

Dollar Cost Averaging

We have seen the cost of a gallon of gas at the pump change quite often. Some of us are very conscious of the price at the pump. We watch the price daily. If the price is low enough, we might fill up the tank. If the price is unfriendly, we just buy what we need right now and watch for the price again tomorrow.

The effect this strategy has on the average cost per gallon is obvious. If you were oblivious to the price of gas and filled up your tank on every visit to the gas station, your cost per gallon would undoubtedly be higher than if you followed the strategy above. ...Unless, of course, you are very lucky.

Dollar cost averaging tries to achieve the same effect with stock investing.

Suppose you love Apple as a company and want to own their stock for the long term. You may use $200 of your monthly savings to buy AAPL. In a month when AAPL price is higher, your $200 will buy fewer shares of stock. In a month when AAPL price is lower, your $200 will buy more shares. After many months, if you look at the average price paid per share of Apple stock, you will be delighted to discover that your purchase price is lower than the average price of AAPL stock over the same period! This is because you bought more shares when the price was lower, and fewer share when the price was higher.

Dollar cost averaging helps you invest when you have a long time horizon and avoids the temptation to engage in a futile market timing effort.

It is, however, worth noting that dollar cost averaging does not ensure a profit in rising markets or protect against a loss in declining markets.