Stay informed with free updates by signing up to the US equities myFT Digest, delivered directly to your inbox. Retail traders in the US stock market this year have been capitalizing on buying the dip strategy, resulting in significant profits reminiscent of the early stages of the Covid-19 crisis. This trend has contributed to a surge in Wall Street equities to record highs.
Individual investors have injected a record $155 billion into US stocks and exchange traded funds in 2025, surpassing the meme-stock boom of 2021. Despite market turbulence caused by President Donald Trump’s tariffs on US trading partners in April, these retail traders have remained steadfast in their approach of buying stocks at a discounted price and reaping the benefits as the market rebounds.
The Nasdaq 100 index, consisting of large-cap US technology stocks, has seen a 7.8% increase this year. However, investors who strategically bought the index after a previous trading session’s dip have enjoyed a cumulative return of 31%, as analyzed by the Bank of America. This dip-buying strategy has become ingrained in investors over the past decade, especially during short-lived downturns in the market.
According to Mike Zigmont, co-head of trading and research at Visdom Investment Group, the belief in buying the dip has become a prevailing strategy among investors. This year’s returns using the Bank of America’s dip-buying model are the best since early 2020 and the second best in data dating back to 1985. Vanda’s senior vice-president of research, Marco Iachini, highlighted that retail investors continue to play a significant role in the market, with their dip-buying bias remaining intact.
Despite concerns among professional investors regarding Trump’s fiscal policies and the potential impact on economic growth, US stocks have surged to new highs fueled by the buy-the-dip dynamic. However, caution is advised by experts like Rob Arnott, chair of Research Affiliates, who warns that dip-buying can be a risky strategy, especially in a volatile market.
As the market continues to fluctuate, the dip-buying trend remains a popular strategy among retail traders. However, it is essential for investors to exercise caution and be prepared for potential downturns that may challenge the effectiveness of this approach. Stay informed and navigate the market effectively by signing up for the latest updates on US equities through myFT Digest.
