In the past two trading days, the stock market has experienced significant fluctuations, leaving many investors perplexedDespite the government's reaffirmation of its commitment to stable growth in last weekend’s work report and a GDP growth target of 5.5% that exceeded market expectations, the market's relentless decline has left an unsettling feeling among traders.

Market sentiment is notoriously fickle and unpredictable in the short runA post-mortem analysis indicates that the ongoing global conflicts and tensions have become key disruptive factors contributing to the current instability.

Investors are increasingly concerned that the protracted nature of these conflicts may disrupt global supply chains for energy and agricultural products, exacerbating already existing supply-demand conflicts and inflating the global inflationary landscape

This rising anxiety is reflected in the rapid surge of Brent crude oil futures prices, which echoes the collective unease permeating the marketHence, inflationary pressures have again taken center stage in short-term market trends, leading to drastic corrections in global stock indices.

For the domestic market, in addition to the aforementioned global risk aversion, a short-term resurgence of COVID-19 cases has also instigated concerns regarding the government’s process for managing the pandemicThis has served as yet another source of market disturbanceThe consistent adjustments in the market since the beginning of the year have made investors, particularly new market entrants and amateur fund managers, exceedingly skittish.

The resulting downward trend in the market has intensified the already frail sentiment among these new investors, driving them to panic sell

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This has led fund managers to reactively reduce their holdings, creating a negative feedback loop that further exacerbates micro-level liquidity in the market.

However, the critical issue is not necessarily the reasons behind the market adjustments but rather how investors should respond to these fluctuationsSeasoned investors see opportunities in price drops, perceiving “gold beneath the surface,” while new investors tend to panic and divest to find peace of mind, abandoning the original strategy of “buying low during a dip.”

Thus, it seems imperative to reevaluate the rationale behind buying more when prices are low under the current market conditions.

The principle of “buying the dip” is predicated on a fundamental assumption: the long-term upward trend of the market

For broad market indices, such as the CSI 300, investing entails a belief in national prosperity and the conviction that over a long horizon, the economy will flourish and grow in scale; investment in individual stocks relates to a belief in a company's increasing competitive advantage and profitability.

As long as the long-term trend is upward, purchasing at lower prices means greater potential for profit down the lineThus, the “buy when it dips” strategy seems fundamentally soundHowever, a critical question emerges: is the long-term upward trend guaranteed?

Investing in broad market indices inherently involves betting on national fortunes; however, the effectiveness of this strategy largely depends on which nation's prosperity one is betting on

For instance, Warren Buffett often reiterates that one of the cornerstones of his investment success is simply being born in AmericaReturning to the A-share market, for long-term investors, it necessitates a belief in China’s national trajectory as wellIf one is optimistic about China's economic development being steady and progressive, then investing in indices like the CSI 300 with a strategy of “buying when prices dip” becomes undoubtedly validGreater holding periods correlate with increased profit certainty.

From the perspective of individual stocks, this attribute boils down to examining a company's competitive barriers: whether it can maintain its advantage and profitability over the medium to long termThis leads to fundamental analysis, as there are both strong and weak companies among the thousands of publicly traded firms

Therefore, the “buy when it dips” guiding principle is not universally applicable, unless investors are confident in the long-term competitiveness of their selected companiesThis aligns with the principle of the “circle of competence” for value investors, which teaches to “not invest when one lacks knowledge,” suggesting to only invest within one's area of certaintyIf there is no confidence in any single firm, choosing industry indices may serve as a reasonable alternative.

For example, if an investor believes that high-end liquor will prosper over the long haul but cannot decide between Moutai or Wuliangye, investing in a liquor sector fund becomes practicalIf one is confident that China’s digital economy will thrive but lacks insights into related stocks, targeting ETFs or funds based on the digital economy presents a feasible strategy

In such scenarios, the logic of buying more during price drops holds water.

In summary, the strategy of buying more during downturns is justified within a value-investing framework, where the precondition for this framework’s validity lies in long-term upward trendsThese elements are intertwined with national fortunes, fundamental analysis, and the necessity for long-term holdingIn other words, if one cannot commit to sustained investment, comfortable with intentional ignorance, or confident in national growth, then the “buying the dip” strategy becomes inapplicableConversely, for those who can achieve these prerequisites, market declines signal the opportune moments to buy more.

Note: The market is risky; exercise caution when investing.