Does buying the dip pay? Since 1993, SPY (the S&P 500 ETF, a fund traded like a share) closed 3% or more below its highest close so far on 66 separate occasions. We call each one a dip. One year later, the mean (average) return was 12.1%. Any start day gave 12.1% too.
Waiting for a dip did not help a savings plan either. A saver who put away $1,000 a month and invested only after a dip finished behind a saver who bought every month. The dip plan trailed at all three dip sizes in all 24 start years we tested. The test uses daily closing prices from 29 January 1993 to 26 October 2026, with dividends counted.
What does "buy the dip" mean? Buy the dip means buying an asset after its price falls from its highest close to date. In our SPY test, buying after a fall of 3%, 5% or 10% did not clearly beat buying on any day.
SPY had 66 separate dips of 3% or more, 36 of 5% or more and 12 of 10% or more. The mean one-year return after them was 12.1%, 13.7% and 14.4%, against 12.1% for any day.
Of the 66 dips of 3%, 36 later fell 5% below the high, 12 fell 10% and 4 fell 20%.
A $1,000-a-month saver who waited for a dip finished 0.7% (3% dip), 0.9% (5%) and 9.2% (10%) behind a saver who invested every month.
What does buy the dip mean?
Buying the dip means putting money in after a price has dropped. The dip is the drop. A dip needs a size rule. We tested three sizes: 3%, 5% and 10%.
Our explainer on what a drawdown is defines the fall from a high. This test uses the same idea.
How did we define a dip?
A dip is a close that sits at least 3%, 5% or 10% below SPY's highest close to date. The highest close is the high. We counted dividend-adjusted closes, so the high includes dividends.
A dip counts once. It starts on the first close that reaches the threshold after a new high. It ends when SPY closes above that high.
We searched all 8,493 daily prices from 29 January 1993 to 26 October 2026. The first high is the first close in the file.
A 10% dip passes through 3% and 5% on the way. Each 10% dip therefore also appears in the other two sets.
How often did SPY dip?
Source: YX Insights price data
SPY had 66 dips of 3%, 36 of 5% and 12 of 10%. The first 3% dip came on 16 February 1993. The latest came on 16 September 2026.
What happened one year after a dip?
We measured the return from the close that triggered each dip to the close 252 trading days later. The comparison is every start day in the file, which gives 8,241 one-year returns.
The median is the middle return.
Source: YX Insights price data
Four of the 66 dips of 3% came too late for a full year of data, so their returns use 62 dips. The 5% row uses 34 of 36. Any start day gave a mean of 12.1% and a median of 14.5%. A rise followed on 81.8% of start days.
After a 3% dip, the mean was 12.1%, the median 15.5% and 50 of 62 returns were positive, 80.6%. After a 5% dip, the mean was 13.7% and the median 16.7%. After a 10% dip, the mean was 14.4% and the median 20.4%.
The medians after dips top the 14.5% baseline, but the 10% row rests on 12 dips. We ran no significance test.
Do the dips count as separate tests?
Not fully. Take the 62 dips of 3% with a full year of data. Of the 61 after the first, 56 came within 252 trading days of the one before.
We reran the comparison on dips that stand apart, keeping a dip only when 252 trading days had passed since the last one kept.
That left 16 dips of 3%, 14 of 5% and 9 of 10%. The mean one-year return was 13.5%, 15.7% and 15.0%. The medians were 9.6%, 13.9% and 18.1%.
With 9 to 16 events each, these returns against the 12.1% mean and 14.5% median for any day are weak evidence.
How many dips kept falling?
We tracked the lowest close in each episode, between the trigger and the next high.
Source: YX Insights price data
Of the 66 dips of 3%, 36 reached a fall of 5%, 12 reached 10% and 4 reached 20%. Those 4 include 3 that reached 30% and 1 that reached 50%.
After the trigger close, SPY closed lower again before its next high in 56 of the 66 dips of 3%. The mean further fall from the trigger close to the lowest close was 5.0%, counting dips that fell no further as zero.
What happened after the 12 dips of 10%?
The table lists all 12. The fall is the gap between the high and the lowest close before the next high. The last column is the return from the trigger close to the close 252 trading days later.
Dip of 10% reached on | High it fell from | Lowest fall from the high | Return 252 trading days later |
|---|---|---|---|
11 April 1997 | 18 February 1997 | 10.0% | 53.3% |
27 October 1997 | 7 October 1997 | 11.2% | 24.4% |
14 August 1998 | 17 July 1998 | 19.0% | 27.6% |
29 September 1999 | 16 July 1999 | 11.7% | 14.0% |
14 April 2000 | 24 March 2000 | 47.5% | -11.4% |
8 January 2008 | 9 October 2007 | 55.2% | -33.2% |
24 August 2015 | 20 July 2015 | 13.0% | 18.1% |
8 February 2018 | 26 January 2018 | 10.1% | 7.1% |
14 December 2018 | 20 September 2018 | 19.3% | 25.1% |
27 February 2020 | 19 February 2020 | 33.7% | 30.3% |
22 February 2022 | 3 January 2022 | 24.5% | -5.2% |
13 March 2025 | 19 February 2025 | 18.8% | 22.7% |
The fall is the gap between the high and the lowest close before the next high. Returns count dividends. Source: YX Insights price data
Nine of the 12 had a positive year. The three losses followed the 2000 peak, the 2007 peak and the January 2022 peak.
Did waiting for a dip beat investing every month?
A return after a dip leaves out the cost of waiting. A savings plan tests it by changing one thing: when the money goes in.
Each plan saves $1,000 on the first trading day of every month from February 1993 to October 2026. That is 405 months and $405,000. The monthly plan invests at once.
A dip plan holds the cash until a close sits at least 3%, 5% or 10% below the high, then invests it all. A deposit that arrives during a dip invests at once.
Cash earns the 3-month US Treasury bill rate, one-twelfth of the annual rate each month. Interest for October 2026 uses the September rate, the latest in the data.
Source: YX Insights price data; Federal Reserve Board
The monthly plan finished at $3,615,433. The 3% dip plan finished at $3,589,685, which is $25,748 or 0.7% lower. The 5% plan finished at $3,583,322, 0.9% lower. The 10% plan finished at $3,282,921, 9.2% lower.
Does the result depend on the start date?
We reran the plans from 24 start years, 1993 to 2016. The latest start leaves more than ten years. Each run ended on 26 October 2026.
The dip plan finished behind the monthly plan in all 24 runs, at every threshold. The median gap was 0.3% for the 3% plan, 0.5% for the 5% plan and 3.1% for the 10% plan.
We reran all 24 with cash earning nothing. The result held. The runs overlap, so they are not independent tests.
What does the test leave out?
The test covers one fund over 33.7 years in which SPY rose 31.8-fold. Another market or period could give another answer.
We measured falls from a high, not falls over a day or a week. We used closing prices, with no fees or taxes. We did not test partial buying.
Our explainers on dollar-cost averaging against a lump sum, time in the market and stock market recovery time test related plans. Our guide to the Relative Strength Index (RSI) covers another rule for spotting a fall.
In this test, one-year returns after a dip did not clearly beat a random start day. Savers who waited for a dip finished behind savers who invested every month, in all 24 start years we tested. The test cannot speak for another market.
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Common questions about buy the dip
Is buying the dip a good strategy?
In our SPY test, it did not beat investing every month. A saver who waited for a 3% dip finished 0.7% behind. A saver who waited for a 10% dip finished 9.2% behind. In all 24 start years we tested, from 1993 to 2016, the dip plans trailed.
How much does a stock have to fall to be a dip?
We tested falls of 3%, 5% and 10% below SPY's highest close. The size you pick changes the count. Between January 1993 and October 2026, SPY had 66, 36 and 12 separate dips of those sizes. SPY had five and a half times as many 3% dips as 10% dips.
Is buying the dip the same as averaging down?
No. Averaging down means buying more of a holding after its price falls below the price already paid. Buying the dip means buying after a fall from the highest price to date, whether or not the buyer owns the asset. Both add money after a fall.
Do dips keep falling after you buy?
Often. SPY closed lower again before its next high in 56 of 66 dips of 3%. Of those 66, 36 reached a 5% fall from the high and 12 reached 10%. A dip says a price has dropped, but it does not say that the drop has ended.
DISCLAIMER: This article is intended for educational purposes only. Any information or analysis in this note does not constitute an offer to sell or a solicitation of an offer to buy any securities. Nothing in this note is intended to be investment advice, nor should it be relied upon to make investment decisions. Any opinions, analyses, or probabilities expressed in this note are those of the author as of the note's date of publication and are subject to change without notice.
