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I don’t think that’s true. For one, that dip lasted a very short time, which is atypical. Second, it wasn’t clear that the market fell below its value. Maybe th
by pinky1417 6y ago
I don’t think that’s true. For one, that dip lasted a very short time, which is atypical. Second, it wasn’t clear that the market fell below its value. Maybe the value of the market was 40% below its earlier highs.
“Buying the dip” is a bad strategy if it’s not paired with understanding value. Dips are sometimes temporary overreactions or part of a continued decline. Enron had a big “dip” soon after reaching its high. I suppose if you bought the dip then sold very quickly after, you’d make money, but you’d have to choose the right dip.
- quickthrowman 6y agoCmon now, Enron != VTI/SPY/index funds
- pinky1417 6y agoOh, I didn't mean to suggest they're the same, just explaining why buying the dip isn't a good principal on its own. Something like VTI has the advantage that it's not going to ever be totally worthless unlike any one particular stock. "Buying the dip" as a strategy only makes sense in hindsight. Say it's late 2007 and you have some cash. On Sep 28 of that year, the VTI was at $75.60. By April 2008, it had fallen over 12% to around $66. But it would still go down even more. Same thing as in early 2020: the market falls 5%... do you buy then? Once it fell around 30%, could you identify that as the "bottom" given the information you had at the time?