In part 2 of the Buy the Dip (BTD) series, Ms Vivian Ning’s research shows that BTD can work, especially when strong fundamentals, institutional backing, and positive price trends support potential returns. But it’s not a guaranteed win. Part 3 shows that, like any investment, it comes with risks.
Stock prices can jump up quickly, giving some investors a win, but sometimes it takes a long time for them to bounce back. In the worst case, prices may never recover, and buying more shares could make losses even bigger.
Experts therefore advise investors using the BTD approach to consider factors such as their investing time horizon, since some assets may take years to recover.
Bank of America Example
Take the 2008–2009 global financial crisis: Bank of America’s share price plunged nearly 90%. Yet, according to Trading Economics, its stock has recently reached an 18-year high, meaning investors who held on eventually regained their value, but only after 15 years.
In Ms. Ning’s study, she examined about 4,000 cases of stocks that fell by at least 10% between 2008 and 2009, during one of the worst bear markets in history.
Commenting on her findings, Kiplinger’s Personal Finance columnist Mr James Glassman noted that her results “may tell us more about the recovery of the market as a whole from the Great Recession (and confirming the simple strategy of maintaining your portfolio in tough times) than about a BTD strategy for picking individual stocks.”
Not for Long-Term Investors
Ms. Ning clarified that BTD is more suitable for traders than for long-term investors. Quickly jumping into buying one or several falling stocks in a single day is rarely practical.
Buy and Hold
Mr. Glassman believes BTD works best when paired with a broader “buy-and-hold” approach.
The best way to make money in the stock market is to purchase excellent companies and keep them as long as possible,”
he wrote.
Investors, he added, should sell only when they need the cash. For example, to buy a home, pay tuition, or retire.
Know the Story Behind Falling Prices
Mr Glassman cautioned that a low price is not always a bargain. Sometimes, it signals a deeper problem with the company, such as weak new leadership, rising competition, or changing consumer preferences that management cannot adapt to.
G4S as a Prime Example
Zoning it home, this brings G4S to mind. The security company listed on the Botswana Stock Exchange (BSE) illustrates the risks of blindly buying low. Its man-guarding business has been hit by legislation which prevented it from participating in some areas it historically served. Other parts of the business face increasing competition, putting further pressure on earnings. According to SimplyWallStreet, G4S’s earnings have been shrinking at an average annual rate of -59.5%.
Last year, Imara Capital rated G4S as a “Sell” due to the weak earnings outlook. Between January and September 2025, the company’s share price dropped 62.9%, according to BSE data.
This means an investor buying during that period would have lost nearly two-thirds of their investment. As of 11 November 2025, G4S shares were trading at just P0.91 thebe, according to BSE. To put this in perspective, the stock was P29.00 in 2010, a near-total loss of value over 15 years. SimplyWallStreet estimates the stock is 4,900% overvalued, with a fair value of just P0.018.
As Mr. Andrew Loo, VP of Capital Markets at the Corporate Finance Institute (CFI) cautioned, many investors buy the dip assuming prices will bounce back, but “it is not always the case. There are many examples of companies that have gone bankrupt, which results in stock prices of these companies going to $0/share.”
It’s like Trying to Catch a Falling Knife
Mr Loo’s remarks echo the old investing warning about “trying to catch a falling knife.”
Afinitas Limited, listed on the Domestic Venture Board of the Botswana Stock Exchange (BSE) in 2015 at P1 per share, attracted many pension fund investors through fund managers expecting growth. However, the COVID-19 pandemic significantly hurt the company’s performance, according to its directors. The start-up has not been profitable on the BSE.
By early March 2021, Afinitas’ board announced a strategic review and, after consulting a key investor, decided it was in shareholders’ best interest to seek a voluntary delisting. At the time, the stock traded at 89 thebe, below its original listing price. Yet BDO Wealth, the company’s financial advisor, valued the cash offer at just US 1.49 cents (about 15–17 thebe), a major discount to the 89 thebe trading price.
This highlights the danger of trying to “catch” a falling stock; what seems like a bargain may actually be worth far less than the current price.
Before buying the dip, experts urge investors must understand why the price fell, not just that it did.
