Should You Buy the Dip with XEQT? What the Data Actually Says

When markets dropped about 15% last year, my DMs exploded. Friends, cousins, coworkers I had not spoken to in months – all suddenly wanted to talk about investing. The messages all sounded the same: “Hey, the market’s crashing. Should I buy the dip?”

My uncle called me on a Sunday morning. He had been sitting on $40,000 in a savings account for three years, waiting for “the right time.” Now that prices were falling, he was convinced his moment had finally arrived. “This is what I’ve been waiting for,” he said. “I’m going all in tomorrow.”

Except he did not. Markets dropped another 5% that week, and he froze. “Maybe I should wait for it to go lower.” Then markets bounced. Then they dropped again. Then they recovered. Six months later, his $40,000 was still sitting in that savings account, and the market was higher than where it had been before the whole correction started.

My uncle’s story is not unique. It is the story of almost everyone who tries to buy the dip. And it is the reason I want to have an honest, data-driven conversation about whether this strategy actually works – especially for Canadian investors holding (or considering) XEQT.

1. What “Buying the Dip” Actually Means

Let us be precise about what we are talking about, because “buy the dip” means different things to different people.

Buying the dip as a strategy means intentionally keeping cash on the sidelines – money you could invest today – and waiting for a meaningful market decline before deploying it. You are making a deliberate choice to stay out of the market, betting that a downturn will come soon enough to make the wait worthwhile.

This is different from:

• Having cash land in your lap during a downturn (a bonus, inheritance, or tax refund that happens to arrive when markets are down)
• Continuing your regular contributions during a downturn (which is just dollar-cost averaging doing its job)
• Rebalancing into equities during a downturn (which XEQT does for you automatically)

The distinction matters enormously, and we will come back to it. But for now, when I say “buying the dip,” I mean the first definition: deliberately sitting in cash, waiting for the market to fall before you invest.

2. The Seductive Logic: Why Buying the Dip Feels Smart

I get the appeal. I really do. Buying the dip feels like the most rational thing in the world. The logic goes like this:

• Markets go up and down
• If you buy after they go down, you get more shares for your money
• More shares at a lower price means higher returns when the market recovers
• Therefore, waiting for a dip is smarter than buying at today’s prices

And when you look at historical charts with the benefit of hindsight, it seems so obvious. “If I had just bought in March 2020 when the market was down 35%… If I had invested during the December 2018 sell-off…”

In hindsight, every dip looks like a gift. The bottom is clearly marked on the chart. The recovery is visible. The path forward is obvious.

But you are not investing in hindsight. You are investing in real time, with real money, real fear, and no idea where the bottom is. The “buy low, sell high” mantra is perhaps the most misleading piece of financial advice ever given – not because it is wrong in theory, but because it implies that identifying “low” and “high” is straightforward. It is nearly impossible to do consistently, even for professionals who spend their entire careers trying.

3. What the Data Actually Says

Here is where the fantasy meets reality. Researchers have studied the “buy the dip” strategy extensively, and the results are not what most people expect.

Vanguard’s landmark study on lump-sum investing versus dollar-cost averaging found that investing a lump sum immediately outperformed waiting and investing gradually about 67% of the time across rolling historical periods in the US, UK, and Australian markets. The average outperformance was roughly 2.3% over a 12-month period.

But waiting for a dip is even worse than dollar-cost averaging, because at least with DCA you are putting money to work on a schedule. With a “buy the dip” strategy, you are sitting entirely in cash until some arbitrary threshold is hit – a threshold you have to pick in advance without knowing when or if it will come.

Let us put this into concrete terms. Imagine three Canadian investors, each with $12,000 to invest in XEQT at the start of a given year, assuming an average annual return of 8%:

Assumptions: 8% average annual return, $12,000 invested per year. Investor B deploys cash mid-year on average when a 10% dip occurs; in years with no 10% correction (roughly 60-70% of years), the cash earns 2% in a savings account and is invested at year-end. Values are approximate and intended to illustrate the general pattern.

Notice the pattern: Investor A (lump sum) wins, Investor C (DCA) comes in a close second, and Investor B (buy the dip) finishes last. Over 30 years, the buy-the-dip investor trails the lump-sum investor by roughly $271,000 – and trails even the DCA investor by over $200,000.

The gap grows wider with time because of compounding. Every month your money sits in cash instead of invested in the market is a month of compound growth you will never get back.

4. The Hidden Cost of Waiting

When you keep cash on the sidelines waiting for a dip, that money is not just sitting still. It is actively losing value in two ways.

First, inflation is eating it. At 2-3% annual inflation, your purchasing power declines every day your cash is uninvested. Over five years of waiting, you have already lost 10-15% of your purchasing power before the market even does anything.

Second, the opportunity cost is massive. Even a high-interest savings account in Canada pays around 3-4%. Meanwhile, the long-term average return of a globally diversified equity portfolio like XEQT has been approximately 8-10% per year. That gap of 4-7% annually is the price you pay for “safety.”

Let us make this concrete:

That is $3,020 in lost potential growth over just three years of waiting – and the interest earned in the HISA is fully taxable as income, while XEQT gains in a TFSA would be completely tax-free.

Here is the uncomfortable truth: for the buy-the-dip strategy to be worth it, the market needs to drop far enough and soon enough to overcome the growth you missed while waiting. If the market went up 8% per year during two years of waiting, you now need roughly a 25% crash just to get the same entry price you could have had on day one.

The math almost never works in the dip-buyer’s favour.

5. The Psychological Trap: You Will Not Buy When It Actually Dips

This is the part nobody talks about, and it is the real killer of the buy-the-dip strategy.

Let us say you have been sitting on $30,000 in cash, patiently waiting for a 20% market correction. And then it happens. Markets drop 20%.

Here is what is happening in the real world when markets are down 20%:

• Headlines are screaming about economic collapse
• Experts on TV are predicting it will get much worse
• Your coworker just panic-sold everything
• Your parents are calling, worried about their retirement
• Reddit and Twitter are flooded with doom
• Every financial news outlet is running “Is this the next 2008?” stories
• Companies are announcing layoffs
• Maybe your company is announcing layoffs

In that environment, you are supposed to take your entire $30,000 in cash – probably the largest chunk of money you have ever had – and put it into a market that is actively falling, with zero guarantee it will not fall another 20%?

Almost nobody does this. And I do not mean that as a character judgment. It is just human psychology. The same fear that makes a 20% dip feel like a buying opportunity in theory makes it feel like a catastrophe in reality.

This is the fundamental paradox of buying the dip: the conditions that create the dip are the exact conditions that make it psychologically impossible to buy. When markets are cheap, the world feels like it is ending. When markets are expensive, everything feels great. Your brain is wired to buy when things feel safe (at the top) and sell when things feel dangerous (at the bottom).

I lived through this in early 2020. Even as someone who writes about investing and knows the data – when the market was down 30% and my province was locking down, a part of my brain was screaming at me to sell everything. Buying more felt genuinely insane.

The people who say “I would have bought in March 2020” are almost always the same people who did not actually buy in March 2020.

6. But What If You DO Have Cash During a Dip?

Now here is the important nuance, and I want to be very clear about this: there is a big difference between waiting for a dip and happening to have cash during a dip.

If you get a $10,000 bonus at work and the market happens to be down 15%, should you invest it? Absolutely yes. If you receive an inheritance during a correction, should you put it into XEQT? Probably yes (after following the windfall investing framework).

The difference is intent:

• Bad strategy: Keeping $30,000 in cash specifically because you are waiting for a dip to buy XEQT
• Good strategy: Receiving $10,000 and investing it promptly, regardless of where the market currently is – but feeling extra good about it if the market happens to be down

If you have cash that needs to be invested and the market is in a correction, you are in a genuinely fortunate position. Invest it. Do not wait for it to drop further. Do not try to time the exact bottom. Deploy your capital and move on.

The people who do well during dips are not the ones who predicted the dip. They are the ones who had a plan for their money that did not depend on what the market was doing.

7. Historical Examples: The Cost of Waiting for a Dip That Never Came

Want to know what happened to people who waited for a dip before investing? Let us walk through some real examples.

The 2019 Wait-for-a-Crash Crowd

After the December 2018 sell-off, a lot of investors pulled money out and decided to wait for “the next leg down.” Many analysts were predicting a recession in 2019. The inverted yield curve had everyone nervous.

The S&P 500 returned 31.5% in 2019. It was one of the best years in a decade. The crash everyone waited for did not come until March 2020 – and even after that crash, markets ended 2020 higher than where they started 2019. The people who waited missed massive gains.

The 2021 “It’s Too Expensive” Crowd

By mid-2021, markets had already doubled from their March 2020 lows. Countless investors said it was “too late” and the market was “due for a correction.” They sat in cash waiting for prices to come back down.

Markets continued rising through the rest of 2021. Even the 2022 bear market – when the S&P 500 dropped about 25% from its peak – only brought prices back to roughly mid-2021 levels. Anyone waiting since then endured over a year of anxiety just to buy at approximately the same price they could have had without waiting at all.

The 2023 “Recession is Coming” Crowd

At the start of 2023, the consensus among analysts was that a recession was imminent. The Bank of Canada had aggressively hiked rates. Inflation was still elevated. The housing market was slowing. Many investors stayed on the sidelines, convinced that markets would drop further.

The S&P 500 returned about 26% in 2023. The recession never materialized. The investors who waited watched from the sidelines as their patience cost them a quarter of potential returns.

The pattern is clear: markets go up more often than they go down. In any given year, there is roughly a 70-75% chance that the stock market finishes higher than where it started. Waiting for a dip means betting on the 25-30% outcome – and even when you get it right, the dip is often shallow and short-lived.

8. The Only “Dip Strategy” That Actually Works

If buying the dip does not work as a timing strategy, what does work? The answer is boring, but it is backed by decades of evidence: consistent, automatic investing regardless of market conditions.

This is just dollar-cost averaging with discipline. Here is what it looks like in practice:

1. Set up automatic contributions. Every payday, a fixed amount goes from your bank account into your Wealthsimple TFSA (or RRSP) and buys XEQT. No decisions. No checking prices. No waiting.

2. Invest the same amount whether the market is up, down, or sideways. When prices are high, your fixed amount buys fewer units. When prices are low, it buys more. Over time, this averages out to a reasonable cost per unit.

3. Ignore the news. Seriously. The financial news cycle is designed to generate clicks and views, not to help you make good investment decisions. Every correction will feel like the end of the world. It never is.

4. Never skip a contribution. This is the hardest part. When markets are falling and you see your portfolio in the red, the last thing you want to do is add more money. But those contributions during downturns are the ones that generate the highest long-term returns – because you are buying at lower prices.

Here is the beautiful thing about this approach: you ARE buying the dip. You are buying every dip, automatically, without any of the psychological agony of trying to time it. Your January contribution might be at a peak. Your March contribution might catch a correction. Your July contribution might land in the middle of a recovery. Over decades, it all averages out – and you capture the full long-term growth of the market.

The investors who build the most wealth are not the ones with the best timing. They are the ones who showed up consistently and kept investing through every market environment.

9. XEQT’s Built-In Advantage: Automatic Rebalancing

Here is something most people do not realize about XEQT: it is already “buying the dip” for you – at a level of precision and discipline you could never replicate manually.

XEQT is a portfolio ETF that holds four underlying index funds spanning Canadian, US, international, and emerging market equities. It maintains target allocations across these regions, and BlackRock (the fund manager) periodically rebalances the portfolio back to its targets.

What does this mean in practice? When one region drops significantly – say, international stocks fall while US stocks hold steady – the rebalancing process sells some of the relatively expensive holdings and buys more of the relatively cheap ones. It is systematically buying low and selling high across regions, all without you lifting a finger.

This is far more effective than any individual investor trying to time market dips, because:

• It happens automatically – no emotional decisions involved
• It is based on target allocations, not predictions – no guessing when the bottom is in
• It spans multiple markets – diversification across 49 countries means something is always relatively cheap somewhere
• It is tax-efficient within the fund structure – rebalancing inside the ETF wrapper avoids triggering capital gains for you

When someone tells me they want to “buy the dip” with XEQT, I tell them they already are. Every single day they hold XEQT, the fund is making disciplined, data-driven decisions about allocating toward whatever part of the global market is relatively undervalued. You do not need to time anything. The product is doing it for you.

10. The Bottom Line: What You Should Actually Do

Let me bring this all together with a clear, actionable plan.

If you have money to invest right now: Invest it. Today. Do not wait for a dip. The data overwhelmingly supports getting your money into the market as soon as possible. Open your Wealthsimple account, buy XEQT, and move on with your life.

If you want to reduce anxiety: Set up automatic monthly purchases of XEQT instead of investing a lump sum all at once. You will likely give up a small amount of return compared to lump-sum investing, but you will sleep better – and sleeping better means you are more likely to stick with the plan long-term.

If a dip happens after you invest: Do not panic. Do not sell. If anything, increase your contributions during downturns. The units you buy when markets are down will generate the highest returns over time. This is the staying-the-course advantage.

If you happen to have new cash during a dip: Congratulations on your good luck. Invest it promptly. But do not mistake luck for skill, and do not build a strategy around waiting for lightning to strike twice.

If someone tells you to wait for a dip: Politely nod and then go invest anyway. The people giving this advice are almost never the people who actually bought during the last dip. They are people who waited, missed it, and are now justifying their own inaction.

The single best thing you can do for your financial future as a Canadian investor is incredibly simple: buy XEQT consistently, automatically, and regardless of what the market is doing. That is it. That is the whole strategy. And it beats buying the dip every single time.

Related Reading

• Dollar-Cost Averaging with XEQT
• Lump Sum vs DCA: Which Is Better for XEQT?
• XEQT and Market Timing: The Cost of Missing the Best Days
• Buying XEQT at All-Time Highs
• How to Automate Your XEQT Investing on Wealthsimple

XEQT (iShares Core Equity ETF Portfolio) is a long-term investment. Returns are not guaranteed, and past performance does not predict future results. This article is for educational purposes and is not financial advice. Always consider your personal financial situation before making investment decisions.