Is Buying This FXI Dip a Smart Move?

The fund’s past recoveries from steep drops have been a bumpy ride, and what’s inside the basket helps explain why.

The iShares China Large-Cap ETF (FXI) is currently sitting about 23.3% below its 52-week high, and if you own it, you’re facing a tough decision. The temptation to buy more at a discount is real. But is this dip a gift, or is it a trap? The fund’s own history offers a complicated answer.

This isn’t the first time investors have been here; the fund saw similar drops in April 2024 and December 2023. Looking back further, the record for buying a dip of this size is mixed. Since 2005, FXI has plunged 20% or more on 13 separate occasions. Of those 13 dips, 7 were followed by a positive return over the next twelve months. That’s a slight majority, but far from a sure thing.

The Rebound Came With A Catch

For those who bought the dip and held on, the median return a year later was +5%. The median peak gain within that year was a more encouraging +16%, a level that took a median of about 182 days to reach. But that potential reward didn’t come easy. The price of admission was often more pain first.

The median worst further drawdown in the year after a dip was 12%. That’s the extra decline a buyer typically had to sit through before the fund found its footing. It’s one thing to buy a dip, but another to watch it keep dipping before it (hopefully) recovers. The full range of outcomes was also wide, with one-year returns after these dips swinging from a painful negative 32% to a strong +45%.

A Concentrated Basket Decides The Outcome

Whether a dip recovers often comes down to what a fund holds. A broad, diversified basket has a natural tendency to bounce back. A concentrated one can stay down if its core theme or region remains out of favor. FXI is the latter. The fund holds 50 positions, but it’s top-heavy. Its five largest holdings make up 36% of the fund, and the top ten account for 55%.

This isn’t a sprawling index. It’s a focused collection of Chinese mega-caps, dominated by names like China Construction Bank, Tencent, and Industrial & Commercial Bank of China. The fund’s fate rests heavily on the shoulders of these few giants. This concentration is what makes the dip-buying decision for FXI different from buying a dip in a broad U.S. market fund.

Ultimately, the fund’s own record suggests that buying a steep drop has paid off more often than not, but it has never been a smooth or guaranteed ride. The question for an investor is whether they believe this specific, concentrated basket of Chinese companies has the strength to rebound again, and whether they have the stomach to potentially endure another 12% drop along the way.

So Is The Dip Worth Buying?

Staring at the dip in FXI, you are weighing whether to buy more or wait it out. The history above is an honest place to start. We know what you are thinking, and it is an absolutely fair question.

Still, a dip-and-recovery record is only half the story. It tells you what tended to happen after past drops, not whether the fund is reasonably valued today or how it is holding up against its peers right now. Before adding to a position, it is worth seeing where it actually stands: our ETF Valuation and Performance Scorecard lines the major ETFs up side by side on valuation, returns, and risk, so the dip becomes one input rather than the whole decision.

What A Dip Chart Cannot Tell You

There is also a limit no dip chart can fix. An index fund has to hold whatever its index dictates, so a buyer can end up with money concentrated in a handful of the same names, whether or not they would have chosen them. Buying the dip does not change what is inside the basket.

If you would rather your exposure be chosen than inherited, our High Quality (HQ) Portfolio is built on a different idea: rule-based, multi-factor screening instead of index membership, with 30 names spread deliberately across different kinds of businesses and re-balanced on a schedule so it leans into quality while trimming what has run. It has a record of outpacing a benchmark that combines the three major indices – the S&P 500, S&P Mid-cap, and Russell 2000.