Blend core SIP strategy with dip buying for gains

Trading volumes in exchange-traded funds (ETFs) on the National Stock Exchange (NSE) typically spike when the Nifty drops more than 1 per cent, according to media reports.

- SANJEEV SINHA

This indicates that savvy investors use such declines as buying opportunities.

ETF advantage ETFs are well-suited for dip-buying as they offer intraday liquidity. "Unlike mutual funds, which are priced only at day-end, ETFs trade in real time, allowing investors to act immediately during sharp intraday declines," says Arun Patel, founder and partner, Arunasset Investment Services.

ETFs have low expense ratios and don't have an exit load. They also provide diversification so that investors don't have to bet on individual stocks.

Buying after a market fall enables investors to acquire assets at more attractive valuations. "Investors get more value for the same investment. It can help lower their average cost of holdings," says Patel.

Behaviourally, the strategy converts volatility into opportunity. "If done calmly, dip-buying can enhance long-term returns," says Sanjeev Govila, certified financial planner and chief executive officer, Hum Fauji Initiatives.