[nightski]

Right and you probably do not follow the market very closely. Which is fine, that is most people. If you start watching it closely though (and I mean over several months to years) there are many patterns that emerge. I knew a lot of people that bought the dip last year. They weren't worried about how long it would take the economy to recover, or if it would go down further because they knew things were VERY cheap and it would eventually come up unless there was a global economic collapse at which point it wouldn't matter anyways.

Most I knew dollar cost averaged down. It paid off very well.

[stouset]

“Buying the dip” sounds brilliant in theory but it fundamentally requires holding on to cash outside of the market waiting for that dip to happen. An order of magnitude more gains have been lost waiting for dips that never come than have been made holding onto cash waiting for those dips.

I have a friend who sold it all in 2017 expecting the crash to come any day now. He’s still holding on to cash waiting for that dip. I’m sure in early 2020 he felt prescient and that this gamble would pay off. Only it didn’t, and he likely missed the one opportunity he had to minimize those lost gains. Not only does buying the dip require correctly guessing the bottom, but by definition you have to have the constitution to put it all in at the peak of bad market news.

[tharkun__]

Yes and no. There's buying the dip when you actually have the time and money to do a lot of this.

And then there's buying the Covid kind of dip. Personally I didn't sell early enough and I didn't buy back in early enough either. However I also never held onto lots of cash to buy the dip. I simply sold stock I had been holding for a very very long time already anyway, so yes I lost some opportunities but still made enough for it to be worthwhile.

Made up numbers for simplicity but if you have been holding for a long time and your return is 100%, if you sell when it say dips to 90% or 75% or whatever doesn't really matter as long as it then goes down further. That's why big dips like Covid are great for casual investors if you ask me.

Let's say it then goes down to 25% and then goes back up. You don't look every day, you don't trust it yet, because it's been going up and down in between but ultimately dropping down to 25%. But at some point it's been going 2 steps up, one step down for some time and you decide to buy back in at 50% of what your previous holdings had been worth at the peak. You still made a ton of extra money by selling and buying back into the dip.

[cableshaft]

Usually I'd say your correct. Like if I hadn't been laid off and decided to go back to school I would have had no problem buying the dip during the recession in 2008.

But last year could have gone very differently. The US (and the world in general) was tested in all sorts of ways last year in ways the people and the government are really not used to, and things probably should have gone a lot worse than it ended up going, but somehow the country made it through intact, although unfortunately with a lot of dead people and failed businesses.

It went well (for the stock market, at least) this time. Next time, maybe not, especially with climate change continuously getting worse with almost nothing being done about it.

For myself, I didn't bother selling any of my 401k (and kept putting money into it), so I didn't lose anything, but I did start putting spare money into other assets.

[kesselvon]

That assumes you have the time to make up for bad market years like that. If you're retired and you see the market tank like that, its hard to fight the urge to not panic sell