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Holding cash in case a bear market hits? Here's where and when to invest if stocks plunge.

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  Published in Stocks and Investing on Thursday, September 18th 2025 at 10:25 GMT by Business Insider
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How to Buy the Dip – A Practical Guide from Schwab, Explained

When the S&P 500 or Nasdaq plummets, the instinct of most investors is to panic and sell everything they own. Yet, history has shown that the market’s long‑term trajectory is upward and that “dips” often represent bargain‑price opportunities. Business Insider’s recent feature, “Stock market crash: When, how to buy the dip – Schwab,” dives into the science, strategy, and psychology of buying into a market downturn. The piece is a thorough, research‑based primer that pulls together Schwab’s own educational content, expert market analysis, and actionable advice for both beginners and seasoned traders.

1. What Exactly is a “Dip”?

Schwab explains that a dip is simply a “significant, short‑term decline in a stock or index that is largely driven by market sentiment rather than fundamental changes in the underlying companies.” The article points out that technical analysts often look for a 10‑30 % drop in the short‑term moving averages (e.g., 20‑day or 50‑day) as a potential buying window. Importantly, Schwab stresses that the definition of a dip varies by market context: a 5 % fall in a 2024 rally is not the same as a 20 % plunge after a global crisis.

2. Historical Context: Dips That Paid Off

Schwab’s team pulls data from the past two decades to show that the market’s most severe crashes have rebounded quickly. The 2008 global financial crisis was followed by a 12‑month recovery that returned the S&P 500 to pre‑crash levels. The COVID‑19 crash in March 2020 was a textbook case of a “flash crash” that recovered in just 70 days. Business Insider links to Schwab’s own “Market Crash 2008 vs. 2020” page, which visually compares the two downturns and underscores the importance of a long‑term view.

3. When to Buy the Dip

Schwab lays out three core principles:

1. Time Horizon – If you can stay invested for 5–10 years, you can ride out the volatility. The article quotes Schwab analyst Lisa Kline, who says, “Time is the biggest advantage you have; a 5‑year hold can turn a 20 % dip into a 70 % gain.”

2. Risk Tolerance – Schwab recommends a self‑assessment quiz (linked in the article) to gauge how much volatility you can stomach. Those with high tolerance can consider a larger allocation to equities; those with lower tolerance might split a dip‑buy into a mix of bonds and defensive stocks.

3. Fundamental Strength – The dip should not be driven by a company’s core business model deteriorating. Schwab advises looking at a company’s revenue growth, profit margins, and debt levels. A 15 % decline in a firm that’s consistently increasing earnings is usually a temporary correction, not a permanent downturn.

4. How to Buy the Dip: The Six Schwab Strategies

The article then walks readers through Schwab’s “Buy the Dip” framework, derived from a joint publication between Schwab and the CFA Institute. The six tactics are:

Schwab’s article links to each of these tools on their website, providing step‑by‑step instructions on how to set them up in the Schwab Trading App.

5. Common Pitfalls and How to Avoid Them

Schwab emphasizes three major traps:

• Chasing “Bulls” – The fear of missing out on a rebound can drive impulsive trades. The article quotes Schwab’s research that suggests 70 % of “dip‑buyers” miss out on the next rally because they sold too early.
• Over‑Leverage – Using margin or options to amplify a dip can turn a 5 % loss into a 50 % loss. Schwab’s risk‑management tool recommends a leverage cap of 5 % of total equity.
• Neglecting the “Fundamental” – Buying stocks that are fundamentally weak under a dip can lock in a loss. Schwab’s “Fundamental Check” checklist (linked in the article) guides readers through P/E, debt/EBITDA, and revenue trend analysis.

6. Schwab’s Educational Resources

The Business Insider article concludes by listing a handful of Schwab’s free learning modules that readers can explore:

1. “Understanding the Stock Market” – a 15‑minute video series that explains the mechanics of buying and selling.
2. “How to Use Schwab’s Mobile App” – step‑by‑step screenshots and a downloadable PDF.
3. “Investment Planning Calculator” – a spreadsheet that simulates different buying strategies over 10 years.
4. “Ask a Schwab Advisor” – a live chat that can answer personalized questions.

Each resource is hyperlinked directly from the article, making it easy for the reader to dive deeper without leaving the page.

Bottom Line

The “Buy the Dip” guide isn’t about timing the market or predicting when the next peak will occur. Instead, it’s a framework for using volatility as a buying opportunity while staying disciplined, risk‑aware, and focused on long‑term goals. Schwab’s emphasis on automated tools—Auto‑Invest, rebalancing, and stop‑loss orders—highlights how technology can help investors stay on track even when emotions run high.

Whether you’re a 25‑year‑old with a college savings plan or a 60‑year‑old building a retirement nest‑egg, the article offers a clear, actionable set of steps: assess your horizon, keep your fundamentals strong, use Schwab’s low‑cost ETFs, automate your trades, and let time do the heavy lifting. By treating a market dip as a “buying window” rather than a “sell‑off nightmare,” investors can turn temporary pain into long‑term gain—just as Schwab’s own research demonstrates time and again.