Retail investors reap big gains from ‘buying the dip’ in US stocks

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Retail merchants “shopping for the dip” in US stocks this yr have racked up the largest earnings since the early phases of the Covid-19 disaster, serving to to gas a rally that has pushed Wall Road equities to report highs.

Particular person investors have poured a report $155bn into US stocks and change traded funds throughout 2025, in line with knowledge supplier VandaTrack, surpassing the meme-stock increase of 2021.

They continued to purchase at the same time as President Donald Trump’s blitz of tariffs on US buying and selling companions despatched inventory markets tumbling in April — and their religion in the time-honoured technique of piling in after stocks fall in anticipation of a rebound has paid off.

The Nasdaq 100 index of large-cap US expertise stocks has risen 7.8 per cent this yr. However an investor who purchased the index solely when it had fallen throughout the earlier buying and selling session would have locked in a cumulative return of 31 per cent over the identical interval, in line with evaluation by the Financial institution of America. 

“Pops and drops will happen . . . however the dip-buying perception has turn out to be the new faith,” mentioned Mike Zigmont, co-head of buying and selling and analysis at Visdom Funding Group.

The behavior of shopping for into inventory weak spot has turn out to be more and more hard-wired into investors in the decade and a half of buoyant US markets that adopted the 2008-09 world monetary disaster, throughout which downturns have tended to be shortlived.

This yr’s returns are the finest for the BoA’s hypothetical dip-buying mannequin at this stage of the yr since early 2020, and the second finest return in knowledge going again to 1985. 

Vanda’s senior vice-president of analysis Marco Iachini mentioned “retail investors stay a significant drive in the market” and that their “dip-buying bias is absolutely intact”.

The rebound in US stocks — which hit recent all-time highs final week at the same time as the greenback and US Treasuries stay underneath stress — has been “powered by a buy-the-dip dynamic that by some metrics has been even stronger than that seen in the latter phases of the 90s tech bubble,” mentioned BofA fairness analyst Vittoria Volta. 

Skilled investors have eyed the rally with warning resulting from lingering issues over the affect of Trump’s landmark tax and spending invoice on America’s nationwide debt and the potential hit to US financial development from his tariffs. 

Deutsche Financial institution strategists mentioned this week that there had been “few indicators of robust bullish sentiment and danger urge for food” amongst institutional investors since their demand peaked in the first few months of this yr.

However dip-buyers are taking part in a dangerous sport by opting to not money out when costs surge, in line with Rob Arnott, chair of asset administration group Analysis Associates.

“We now have a president who likes to shock individuals, who likes to maintain individuals off steadiness, to confuse his adversaries. All of this can be a recipe for a better volatility regime, and better volatility means shopping for low and promoting excessive is extra worthwhile than in trending markets with steady coverage,” Arnott mentioned.

“Dip-buying works brilliantly till it doesn’t,” he added. “When you’ve a meltdown, it’s a fast path to deep remorse.”