Buy the Dip is Broken, Do THIS Instead!

Now most investors think buying the dip just means whenever stocks go down, you buy more, kind of a vague idea of picking up stocks at a discount. There’s an official strategy though that has tracked returns for buying the dip. In data from Dow Jones, week after returns if you bought stocks after a one-day decline of 1% or more, so if you bought the dip anytime stocks went down by 1% or more in a day, you made between 0.5% and 1% on average the next week.

In fact, last year when buying the dip would have meant an average return of 2% in a single week! But 2022 has been anything but normal and less than nice to investors and the buy the dip stock strategy is broken!

This year is the worst for the buy the dip strategy since the Great Depression of 1931. Buying after a one-percent drop this year would have lost another 1.2% in the following week.

The stock market is down 23% so far this year, on track for the worst annual drop since 2008. And that crash is only getting worse! I’ll show you a strategy that works better than buying the dip in stocks.

My Investing Recommendations 📈

Joseph Hogue, CFA spent nearly a decade as an investment analyst for institutional firms and banks. He now helps people understand their financial lives through debt payoff strategies, investing and ways to save more money. He has appeared on Bloomberg and on sites like CNBC and Morningstar. He holds the Chartered Financial Analyst (CFA) designation and is a veteran of the Marine Corps.
#stocks #stockmarket #investing

[EasyEBL]

Are you still sticking to this now that the market has bounced the past week to 3700? I missed my chance when S&P briefly dipped below 3500 last week. Are we still headed down toward 3000? Thanks for your great videos.

[ronrocheleau]

Hey Joe. Big fan. You’re only one of a very small handful of “Youtube financial analysts” I still subscribe to. Anyway, I’d love to get your opinion on using Seeking Alpha’s “Quant” ratings to evaluate/pick possible buy/sells? Any experience with them?

[michaeldube]

S&P came close to 3500 on Wednesday

[PepeInvest]

I only got about 100-150 a week to invest so I just keep DCA

[miawhitlock]

My spouse and I are adding a variety of stocks/ETF to my present holdings for the long term, We've set aside $250k to start following inflation-indexed bonds and stocks of companies with solid cash flows, I believe it is a good time to capitalize on the market for long-term gains, but it wouldn't hurt to know means of actualizing short term profit.

[brandonplank]

You crack me up. Awesome video. Under 10min are my favorites! I am going to do exactly this and remove all emotion from this market. Thank you !

[moneywithnira]

Great video! I think buying the dip is often misunderstood as a strategy. Some stocks dip for a reason, which is material enough that the company will most likely not rebound. Other cases, when a stock drops due to panic reaction to changes that are not material enough to cause permanent issue for the company. The later scenario is good for buying the dip and the former leaves you with more losses. Anyways, I liked your projections for the S&P500 prices. The earnings multiple of 15 is a good approximation.

[bbarre]

This type of video is why I still watch you. Strategy on the market as a whole, not stock picking. Btw the video that made me subscribe way back was your detailed tips on how to best use LendingClub. I'd be interested in similar for other alternative investment platforms that you find to be solid.

[darrensteves]

Love the strategy Joeeph! It definitely relieves stress having a plan!

[NoelLorenzanaCPA]

Great video, Joseph! Thanks for sharing

[marcosagosti]

Great video Joseph! Thanks for those levels, they make a lot of sense. There is an interesting measure of sellers capitulation, which is another way of saying that sellers finally say "enough". When the New Highs - New Lows in the NYSE over the last 52 weeks reaches ~-40% the market rebound. This means that 40% of the 3, 400 stocks in NYSE hit a new low over the last year with very few advancing. This measure signaled the 666 in march 2009 as well as the low of 2020. To be fair in a protracted Bear market this level can be reached more than once, but all together it's as good as it gets to call a bottom. Just to be clear, I'm not advocating to wait until that signal fires, but it's something to keep track.

[stevenbernstein]

What happens if the S&P 500 never hits these levels?

[ed-lyne]

Great advice as usual! I find you very optimistic though that we will have a bargain at 3150 or 3000 S&P. I don't see why it could drop so low... to the 2020 crash point. I mean, people already prepare themselves for a recession, etc. It will not be a surprise.

[veronica]

No one can know for sure what is going to happen with the market. The markets behave unpredictable lots of time. So I am not buying today your theory. Even this people who bought the deep this year in the long run, in the horizon of 10 years they will be considerably up from this point now. That I know for sure.

[pfv]

This is the correct advise about buying more of stocks. I did comment about your initial strategy on buying on dips which can be misleading for 2022

[henrikmadsen]

I lost money buying the penny stock you recommended.

[mr.financial]

This was an over simplification in my opinion. Buying the dip means many things to different investors. Aimlessly buying stocks just because the price drops is not investing, it is pure speculation. And that's whether it is an index or individual stock. Investors buy great stocks at great prices, as buffet said. If the stock is of good value, it is of good value regardless of the overall market. Holding cash and not staying fully invested has historically brought worse returns 70%of the time approx. This is trying to time the market in its basic form. Holding 30% cash sounds great if your targets get hit or the market keeps declining, but what if the market doesn't... And what if you miss all 3 price targets. You may miss out in a large way as you wait to try to deploy that cash in the future.

[betterhousehome]

What is your opinion on REITS in the current state of the economy?

[Imagineer-]

Just to show you I'm paying attention your last numbers were 1/3 3500 1/3 3100 and all in at 2800. I guess I will update my

[j.d.]

No strategy works all the time, that's the problem.