Buying on the dips

In the context of a dire UK stock market - down 15% thus far - I seem to have escaped relatively lightly at minus 6%. This has been despite quite heavy allocation to financials. It's really difficult to understand why, but I've been helped by large rises in Dragon Oil, Kazakhmys (copper), Albidon (nickel and other metals) and a recovery in my largest holding, Character Toys.

Volatility has been incredible, but until today each bounce has been followed by a larger move down. Many comment that instead of "buying the dips" one should "sell the rallies". Despite the waves of experts' worries, I've been adding on the dips and only slightly trimming on rallies. We'll see if it works: certainly, I've got a higher stream of dividends due but who's going to get excited about a 5-6% annual return?

My reasoning for adding is that I've seen so much directors' buying of own company shares over recent months and in companies where I see compelling value: Cattles, Robert Walters (superb results). There were also heavy directors' purchases in HBOS after the dramatic plunge in its shares amid rumours of a liquidity crisis last Wednesday. Hearing the vehement denials from the bank itself and the poo-pooing of the rumours by the Bank of England, I purchased more HBOS immediately.