Is buying Nifty 50 ETFs on every 1% dip a smart strategy? Mutual fund expert offers help

A Reddit user on the Indian Street Bets community posted that the user buys 1 lakh worth of Nifty 50 ETF for every 1% down from the all-time high, and this is the 22nd day of following the same strategy.

To which a mutual fund expert says that using a correction from a peak to build an investment strategy is not something that is suggested considering that the peak itself may not be an indicator of whether the indices were overvalued at that point.

Also Read | Planning your mutual fund investment for FY26? Experts recommend inclination towards flexicap & multicap

“Using a correction from a peak to build an investment strategy is not something we would suggest considering that the peak itself may not be an indicator of whether the indices were overvalued at that point. An anchoring bias to the highest point in the markets, or even the lowest points is not a good approach to investing in our view, as it may not be based on earnings growth or valuations of markets vis a vis their historical trends,” said Vishal Dhawan, CEO, Plan Ahead Wealth Advisors, a wealth management firm in Mumbai.

While it may seem logical to buy on every correction, anchoring investments to a previous peak may not be the most effective strategy. The peak itself is not necessarily an indicator of overvaluation, and assuming that any drop from this level is a buying opportunity can be misleading.

The important thing to note is how one should stagger the investments. Like with every one percent dip, should one makean investment or should there be a fixed percentage that needs to be decided before making investment decisions.

The expert recommends that using a SIP for rupee cost averaging by investing a similar amount every week is one of the approaches to take, wherein investments happen in equal values, independent of market levels, could be one strategy.

Also Read | Remember 'Picture Abhi Baki hai' : Nilesh Shah of Kotak Mutual Fund reacts on Trump tariffs

“An alternative strategy could be to use value cost averaging wherein the amount each week or month varies, but the number of units purchased are the same, as a result of which when markets correct, more money is invested, whilst when markets go up, less money is invested to purchase the same number of units,” Dhawan adds.

Buying on dips can be effective, but basing the investment decision solely on a market’s all-time high may not be the best approach. A well-structured investment strategy that considers market fundamentals, valuations, and disciplined investing can lead to more consistent and rational wealth accumulation.

What is rupee cost averaging?


It is an investment strategy where you invest a fixed amount of money at regular intervals, regardless of the market's fluctuations. This helps you buy more units when the price is low and fewer units when the price is high, potentially leading to a lower average cost per unit over time.