How a typical buy and hold investor could still benefit from disciplined buy the dip without speculatively market timing
Sitting on cash with an intension of buying later the dip is certainly speculative market timing and rarely beats buy and hold strategy. However, if one wants to slowly build position into some promising (based on fundamentals such as excellent long term earnings growth potential) asset class which happens to be currently overpriced (say, significantly higher PE than Total Stock market index), then tactically exchanging Total Stock index position with that one could be good use of buying the dip strategy. I have been slowly building position (with max limit of 8% of my portfolio though) in semiconductor sector by buying 1% of my portfolio in SOXX on each 8% dip from my last buy. With technology sector being so volatile, 5 such limit orders got executed during last one year. With all these averaging of buying on dip, my average paid PE is close to 17 (same as current PE of Total Stock index). Source: How to Face Up to Buying the Dips - WSJ