This Year, a Tried-and True Investment Strategy Backfires

'Buy the dip' doesn't work if the market keeps dipping
By John Johnson,  Newser Staff
Posted Sep 26, 2022 11:05 AM CDT
This Year, a Tried-and True Investment Strategy Backfires
Traders work on the floor of the New York Stock Exchange.   (AP Photo/Julia Nikhinson)

The stock market had another brutal week last week, and investors who decided to "buy the dip" in anticipation of a rebound might have been regretting it early Monday. The market began the new week in the red once again, reports CNBC. Such regret has been common in 2022, reports the Wall Street Journal. In fact, this has been "the worst year for buying the stock-market dip since the 1930s," per the story. The key stat to back that up: Every time the benchmark S&P 500 has lost 1% on a given day this year, the market has dropped an average of 1.2% the following week. It's the biggest percentage decline since 1931.

"I've really been taking a beating," a 58-year-old amateur investor who has been a dip buyer tells the newspaper. "I'm uncomfortable." As the Journal explains, the shifting sentiment could have big ramifications. The buy-the-dip ethos has played a strong role in recent years in helping the stock market recover from setbacks and thrive. But if people like the above investor stop the practice, it could deepen the market's troubles. Meanwhile, a piece at Yahoo Finance draws a parallel to today's woes and those of the 1970s, and adds some advice. "It wasn't all darkness" in that decade, writes Andy Serwer. "The disco balls lit up some stocks. You just had to look that much harder to find them. That's a likely scenario going forward as well." (Read more investing stories.)

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