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In these times of huge fluctuations throughout stock markets, commodity prices and currency indices, a lot of investors swear by the concept of “buying the dip”.

I have had many conversations with clients about how to navigate the volatility we have seen in markets in recent weeks, and its times like these where we can often lose our sense of perspective. This is why I’ve chosen to highlight this analysis to make a simple point.

We invest because we believe that capital markets will deliver. We know they don’t move in straight lines, but in the end we expect markets to recover from periods like the one we have recently experienced.

On this basis, there is an opportunity cost in having money that is not invested. The longer this money is left uninvested, the greater this cost of inaction is.

Michael Batnick has written a great post about “buying the dip”, over at his Irrelevant Investor blog, and you can read Michael’s post here.

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