A ‘top UK share’ is one that I think has a strong reputation and a positive future outlook. Even with this being the case, the share price could still fall in the short term. With high market volatility, the stock could get caught up in negative investor sentiment. I see this as more of a dip to buy, rather than the start of a long-term decline for select companies. Therefore, here are a few ways that I’m buying the dip at the moment.
Keeping an eye on the past
The first way is by looking at historical price levels. The most common feature I consider is the share price performance over the past year. This gives me a long enough period to encapsulate performance, but doesn’t get clouded by the start of the pandemic in 2020.
If a top UK share is falling and has reached the lows from the past year, this is a point at which I’d consider buying the dip. It’s very hard to say when a stock is undervalued just by looking at a chart. Yet if the share price is at a historical low, the chances are that it’s not overvalued.
Planning ahead with orders
The second way I’m trying to buy the dip is by making use of automatic buying orders. Instead of me manually going on my platform and buying a share, I can leave an order to buy at a particular price. These orders can be left for a day, a month, or until cancelled.
The reason why I like orders is that I can specify a lower price that I’m happy to buy at. Then if a dip happens when I’m away from home, I’m happy because I know that I’ve left orders ready to take advantage of this opportunity.
Buying in stages
The third way I’m taking advantage of volatility is by staggering my purchases over time. Most of the top shares I’m focused on have been around for a very long time. For example, Royal Mail was formed back in 1516! So I’m not worried about the stock going bust any time soon. With that in mind, I’m investing smaller amounts over the course of any dips that may happen over the summer or beyond.
This helps me to manage my risk. If I buy on a dip but the stock actually continues to fall, I have more funds ready to invest. If I just invest everything on the first red day, I could be left holding on to an unrealised loss for longer than I want to.
The risk with this though is that there might only be one or two dips to take advantage of. If I’m sat on the sidelines waiting for a slump that never comes, I’ll be missing out on potential profits. But that’s an issue I have to accept as an investor.