Should You Buy the Dip? What Canadians Need to Know
Have you ever heard the advice, “Buy the dip”? It’s one of those catchy investment phrases that gets tossed around at dinner parties, on financial news, and even on social media. But what does it actually mean? More importantly, is it advice that makes sense for everyday Canadians trying to build a secure financial future?
In this post, we’ll unpack the truth about “buying the dip,” how the strategy works, and how ordinary Canadians can apply the principles in a way that’s safe, practical, and stress-free. You’ll learn why long-term investing often beats panic-selling, the simple tools you can use to stay consistent, and why emotional discipline matters just as much as market timing.
Why “Buying the Dip” Gets So Much Attention
“Buying the dip” simply means purchasing investments when the stock market has fallen. Think of it as buying something on sale. If a stock or fund was worth $100 last week but is now $80, some investors see that as a chance to pick it up at a discount.
The theory is built on history. Both the Toronto Stock Exchange (TSX) and the New York Stock Exchange (NYSE) have shown strong long-term growth despite short-term setbacks. On average, global stock markets return around 7–8% annually over long stretches of time. Yes, there are ugly downturns—like 2008 or 2020—but each time, the market eventually recovered and went on to reach new highs.
For example, during the COVID-19 crash in March 2020, the TSX lost nearly a third of its value in just a few weeks. Scary, right? But by early 2021, it had already recovered, and long-term investors who held on—or even bought more—were sitting on gains.
The Challenge: Fear vs. Opportunity
If buying low is such a great idea, why doesn’t everyone do it? The answer is simple: fear. When the market drops 20% or 30%, it feels less like a “sale” and more like a financial horror show. People panic, sell their investments, and lock in losses that might have reversed if they had held on.
Let’s meet Sarah and Mike, a fictional couple from Winnipeg. In 2020, their retirement accounts dropped by nearly $40,000 in just one month. Mike panicked and wanted to sell everything before “it all disappeared.” Sarah hesitated, remembering advice from a financial planner: “Don’t sell in a panic.” They held on. By mid-2021, not only had they recovered their losses, but their portfolio had grown by another $15,000. If they had sold, their paper loss would have become permanent.
This is the emotional rollercoaster of investing. The ups bring excitement, the downs bring fear. “Buying the dip” isn’t just about numbers—it’s about learning how to manage your emotions.
What Canadians Can Learn from Past Market Crashes
Every market crash feels unique, but history shows us that downturns don’t last forever. Here are a few examples:
2008 Financial Crisis
Markets crashed globally. Many Canadians saw their RRSPs lose up to 30% in value. Those who sold locked in losses. Those who held or added to their investments saw recovery within about three years.
2020 COVID Crash
The TSX dropped by 33% in just weeks. Investors who panicked and sold missed out on a rapid rebound that restored values within a year.
Ongoing Volatility
Even today, markets rise and fall on news about interest rates, inflation, and global events. The lesson? Volatility is normal. It’s not a reason to give up—it’s a reason to plan smarter.
For more on why market timing rarely works, check out this article on Manage Your Money.
Why Diversification Makes “Buying the Dip” Easier
One of the hardest parts about “buying the dip” is deciding what to buy. Should you pick individual stocks? That hot new tech company? Or the latest “can’t-miss” opportunity being pushed online? For most Canadians, the smartest answer is neither. Instead, diversification is the key.
Diversification simply means spreading your money across many investments so you’re not relying on just one company or industry to perform well. Think of it like grocery shopping—you wouldn’t fill your cart with nothing but bananas. If one bunch spoils, your week’s meals are ruined. The same is true with investing.
That’s where exchange-traded funds (ETFs) come in. ETFs are like baskets that hold hundreds—or even thousands—of stocks and bonds. When you buy one ETF, you instantly get diversification without needing to research dozens of companies. Better yet, most ETFs charge very low fees compared to mutual funds, which means more of your money stays invested and working for you.
Canadian Examples of Low-Fee ETFs
Vanguard All-Equity ETF (VEQT)
A one-stop global equity fund with thousands of companies inside. Perfect if you want to go all-in on stocks and can handle volatility.
iShares Core Balanced ETF Portfolio (XBAL)
A balanced option that mixes stocks and bonds for more stability. Great for Canadians who want some growth but also some cushion.
BMO Growth ETF Portfolio (ZGRO)
Another all-in-one ETF that tilts toward stocks but includes bonds to smooth out the ride. Ideal for long-term investors comfortable with some ups and downs.
The best part? You don’t need to keep rebalancing or guessing. These funds do the heavy lifting for you. Once you’ve bought in, the strategy is simple: hold, ignore the noise, and let time do its work.
RRSPs and TFSAs: Your Canadian Superpowers
Knowing where to invest is just as important as knowing what to invest in. Thankfully, Canadians have two of the best investment tools in the world: the Registered Retirement Savings Plan (RRSP) and the Tax-Free Savings Account (TFSA).
RRSP
RRSPs let you contribute money before tax, reducing your taxable income today. Your investments grow tax-deferred, and you pay tax only when you withdraw—usually in retirement when your income may be lower. Perfect for long-term retirement savings.
TFSA
TFSAs use after-tax money, but everything inside grows tax-free. Withdrawals are also tax-free, making them an incredibly flexible tool for medium- and long-term goals. Need to access funds before retirement? No penalty. Want to shelter investments from tax forever? This is your account.
For Canadians who want to “buy the dip,” both accounts are ideal vehicles. You get the tax advantages, the flexibility, and the simplicity of keeping your investments sheltered from the taxman.
A Case Study: Amina and Zoe
Amina and Zoe, partners in Vancouver, live with fluctuating incomes from creative freelance work. Some months, they bring in $12,000 combined. Other months, barely $4,000. For them, budgeting is an art, not a science. When the pandemic crash hit in 2020, they had two options: panic and sell, or stay disciplined. They chose discipline.
They redirected their extra income in high-earning months into a mix of ETFs inside their TFSAs. When the market fell, they increased their contributions, even though it felt scary. By mid-2021, their investments had grown significantly, giving them both financial stability and confidence in their long-term plan.
Their story shows that “buying the dip” isn’t just for high-earning professionals. With discipline, even variable-income Canadians can make it work.
Where Most Canadians Go Wrong
Despite all these tools, many Canadians still miss out. Why?
They chase hot tips
Buying single stocks based on trends or headlines is like gambling. Sometimes it works, but often it doesn’t. Most investors would be better off with boring, diversified ETFs.
They overpay in fees
High-fee mutual funds eat into your returns over decades. Imagine paying 2% annually when ETFs charge 0.25%—that’s tens of thousands of dollars lost to fees by retirement. For a deeper dive, see this post on RRSPs in Canada.
They panic-sell
Fear drives people to sell at the worst possible time—when prices are low. This locks in losses and makes recovery harder.
They wait too long to start
Many Canadians say they’ll “invest later” when they have more money. The truth is, starting small now beats waiting for the “perfect” time, which never arrives.
The Emotional Roller Coaster of Investing
If you’ve ever checked your portfolio and felt your stomach drop, you’re not alone. Investing is as much about psychology as it is about money. When markets go up, we feel smart and optimistic. When they plunge, fear kicks in, and it’s hard not to think, “Maybe I should sell before it gets worse.”
This emotional cycle is so common it has a name: the investor roller coaster. The ups feel great, the downs feel terrifying, and most people panic right at the bottom. Ironically, that’s the best time to invest more. As Warren Buffett famously put it: “Be fearful when others are greedy, and greedy when others are fearful.”
A Case Study: Sarah and Mike
Sarah and Mike live in Mississauga. Sarah earns $65,000 in marketing, and Mike makes $58,000 as a technician. They’re not broke, but somehow their money seems to vanish each month. When the markets dipped in 2022, they pulled out of their mutual fund in fear, locking in losses of nearly 25%. Later, when the market rebounded, they missed the gains. The result? A setback of years in their financial plan.
Their story is a cautionary tale. Panic-selling feels safe in the moment, but it turns a temporary paper loss into a permanent real loss. The good news? Sarah and Mike are now working with a budget, cutting unnecessary expenses, and easing back into investing through low-cost ETFs inside their TFSAs. The lesson they’ve learned is this: discipline beats fear.
Why Automation is Your Best Friend
Humans aren’t great at discipline when emotions run high. That’s why automation is so powerful. Setting up automatic contributions to your TFSA or RRSP removes willpower from the equation. You don’t have to think about when to buy—you’re always buying, even during downturns.
This strategy is called dollar-cost averaging. By investing the same amount regularly, you buy more shares when prices are low and fewer when they’re high. Over time, this smooths out the cost of your investments and helps you avoid the trap of trying to time the market.
A Case Study: James in Edmonton
James, a single father, thought budgeting meant cutting back on fun with his 8-year-old daughter. He used to spend $400 a month on impulse activities, while only $150 went toward planned outings. By automating his investments into a low-cost ETF through his TFSA, he freed up mental energy and found balance. He cut the waste, planned family adventures, and still invested consistently. James’s financial discipline didn’t take away from his relationship with his daughter—in fact, it made their experiences richer and more intentional.
Canadian Resources That Make It Simple
Thankfully, Canadians don’t need to reinvent the wheel. There are plenty of resources that make automation and diversification easy:
Wealthsimple Invest
An easy entry point for Canadians who want automated ETF investing with low fees. Perfect for beginners.
Questrade
A low-cost brokerage that lets you buy ETFs for free. Great if you want more control while keeping costs down. Check out their ETF offerings here.
Your Bank’s Free Tools
Most major Canadian banks now provide free budgeting and investing apps. For example, RBC’s MyMoney app and TD Goals help track savings goals and automate contributions.
The combination of automation, low-cost ETFs, and tax-sheltered accounts like TFSAs and RRSPs is what makes “buying the dip” a realistic strategy for everyday Canadians.
A Word of Caution
Before we wrap up this section, it’s important to address a counterpoint: what if markets don’t recover as quickly next time? Historically, markets have always rebounded, but the timeline is uncertain. That’s why you should never invest money you’ll need in the short term. Keep an emergency fund separate, so you don’t have to sell investments in a downturn just to pay bills.
Think of it like winter tires. You don’t put them on because you know exactly when you’ll hit ice—you put them on because you know icy conditions will happen. An emergency fund cushions you, so your investments can stay untouched until they recover.
Bringing It All Together
By now, you’ve seen why “buying the dip” isn’t just a catchy phrase—it’s a strategy rooted in history, discipline, and a little bit of courage. The stock market has its ups and downs, but over the long haul, it has always recovered and grown. The challenge isn’t the market—it’s our emotions.
Whether you’re Sarah and Mike in Mississauga learning not to panic-sell, James in Edmonton automating his investments, or Margaret in Halifax proving that smart money management works at any income level, the theme is the same: small, steady actions win every time.
Practical Takeaways You Can Use Today
Build Your Safety Net First
Before worrying about dips and ETFs, make sure you have an emergency fund. Even $1,000 is a good starting point. This fund keeps you from dipping into investments when life throws you a curveball.
Automate Your Investments
Set up automatic contributions to your TFSA or RRSP. Dollar-cost averaging takes timing out of the equation and helps you benefit from downturns without even trying.
Stick With Diversified ETFs
Don’t chase “hot stocks.” Instead, buy and hold low-cost diversified ETFs that track the market. Examples include Vanguard’s All-Equity ETF or iShares Core ETFs. These provide instant diversification and historically solid performance.
Check In, Don’t Obsess
Review your investments once or twice a year, not daily. Markets swing—let them. Constant monitoring only fuels anxiety and rash decisions.
Keep Learning
Knowledge makes it easier to stay calm. Start with resources like Easy as One, Two, Three: Simple Investing for Canadians and Investopedia’s guide to buying the dip. The more you understand, the more confident you’ll feel.
A Final Word
Let’s be real: nobody likes seeing their investments drop. It’s about as fun as a Winnipeg winter with no parka. But here’s the truth—if you stay calm, automate, and keep your eye on the long game, those downturns can actually become your secret weapon.
Think of buying the dip as a long-term loyalty program. While everyone else is panicking and selling, you’re scooping up shares on sale. Fast forward a few years, and you’ll thank your past self for having the courage to stay invested when it mattered most.
You don’t need to predict the next crash. You don’t need to outsmart the market. You just need a plan, some patience, and a sense of humour when things get bumpy.
Ready to Take the Next Step?
If this idea excites you—or even just makes you less scared of market dips—why not take action today? Review your accounts, set up an automatic contribution, and commit to staying the course. Future-you will be very glad you did.
And remember: it’s not about being fearless. It’s about being prepared, intentional, and consistent. That’s the real “secret” behind buying the dip.
Remember: This article provides general information and shouldn’t replace personalized financial advice. Consider consulting with a qualified financial professional for guidance specific to your situation. All investment carries risk, and past performance doesn’t guarantee future results.
In my E-books (“Water Barrel” and “The Balance”) I discuss simple methods to live sensibly for today, take charge of your financial affairs, and invest safely for the long term. For more information please visit David Penna Amazon.
The Money Reservoir, a system for managing irregular income. A Smarter Way to Manage Your Finances and Harness the Power of Reservoirs to Break the Paycheque-to-Paycheque Cycle and Build Financial Stability. For more information please visit The Money Reservoir on Amazon
Disclaimer for ManageYourMoney.ca
The information provided on ManageYourMoney.ca is intended for educational and informational purposes only. It should not be taken as financial advice. The opinions shared are those of the authors and are meant to encourage sensible financial habits and decision-making. We recommend that you do your own research or consult a certified financial advisor before making any financial or investment decisions. All investments come with risks, and there is no guarantee of success. Past performance is not a reliable indicator of future results. Always consider your personal financial situation and risk tolerance before pursuing any investment opportunities.
As always, we are not a qualified financial advisors. We just relate financial management to our own experience which may not resemble yours at all. Advice is frequently worth exactly what you paid for it. Most of ours came from expensive experiences.
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