[motorest]

> The market is down because the future prospects for those businesses just got much worse. Yeah you can buy them at a cheaper price, but their corresponding future output remains down as well.

It should be noted that these moronic "buy the dip" claims are happening when Dow Jones is in a freefall, so the poor people who bought the dip on Friday will today wake up with a portfolio loss of >5% without the market even reopening.

It's funny when these chants take place when prices start to plummet. It's like investors are screaming for unwitting people to buy the bag off their hands.

[liendolucas]

> will today wake up with a portfolio loss of >5% without the market even reopening.

That's pretty much irrelevant unless you opt out next reopening. If you have your portfolio down 15%, 20% or 30% it does not matter. That's the short term picture. If you're investing and looking at how those numbers fluctuate to make decisions and panic you will lose money for sure. No different like going to the casino. You're supposed to buy and hold forever, regardless the market crashes or rises. That's Bogle's advice and I believe is sound advice. So, there could be an opportunity to buy lower now if you are playing the long game.

[motorest]

> That's pretty much irrelevant unless you opt out next reopening.

Not really. If your goal as an investor is to maximize your returns. Obviously, buying a security when it's value is cratering is the worst time to buy simply due to the fact that, in a scenario of an unavoidable bounce back, waiting out while doing nothing is more profitable. Buying earlier in the crash simply means the profitability of your hypothetical scenario is lowered.

> If you have your portfolio down 15%, 20% or 30% it does not matter. That's the short term picture.

I don't think you fully grasp the implications. Even assuming a simplistic interpretation of an unavoidable bounce back, if you postpone buying after the price craters 30% then you're guaranteeing your investment will be more profitable. Remember, the trick is to buy low and sell high, not buy high and hope it will somehow get higher.

[liendolucas]

Problem is that no-one knows when that's going to happen and it can bounce back as fast as it went down, meaning in that situation you would be missing the opportunity too. The investor strategy as per Bogle is simple: buy regularly, regardless the market and hold it forever (until you retire). I don't want to speculate, because that is known to be a losers game. I read some time ago "The Little Book of Common Sense Investing" and to me that seems to be good enough advice to stick with. It's simple and as for what I read from other sources it works.

> Remember, the trick is to buy low and sell high, not buy high and hope it will somehow get higher.

If you take a look at the historical S&P500 (1926-2016) trend even taking into account market crashes the curve always goes up in the long term. That's why Bogle's strategy works.

[seanmcdirmid]

We can fall a lot more, and people who are buying the dip on credit aren't necessarily taking a long term view of the market. Who is keeping a few hundred K in their bank account just in case the market crashes so they can take advantage of it?

Also, 2008 you needed 5 years to recover if you bought at peak (buying as it was lower of course means less time to recover). In 1930, you were looking at 20 years. You could also lose your job if the market really tanks, and buying the dip just means you are less liquid at a time when you need money for living expenses.

[liendolucas]

You're assuming something like all or nothing. As I mentioned I do investing regularly, just as if you were saving money after you paid your bills and you have spare money that otherwise would be sitting in your bank account. Even if I had the amount you mentioned it would be at least for me too risky to do that move. I would do it regularly. If people are taking credits to do that, well they are making an extremely risky move as well. Just because the market could go down doesn't mean that you have to make an all-in move.

[seanmcdirmid]

> You're assuming something like all or nothing.

I'm assuming worst case, which is what you have to prepare to survive through.

> As I mentioned I do investing regularly, just as if you were saving money after you paid your bills and you have spare money that otherwise would be sitting in your bank account.

You are supposed to have 3-6 months of living expenses in your savings account just in case you lose your job. Is that what you are talking about using to invest in a dip?

> Even if I had the amount you mentioned it would be at least for me too risky to do that move. I would do it regularly.

Yes, but you are also saving money for events where you need liquidity right?

If the tariffs go on for awhile and consumption becomes expensive, we can always just cut back on consumption and invest that money instead (Americans consume a lot anyways), that is what the Chinese have been doing all along at least (although they wished their consumers would start consuming more). We are basically going to swap places with the Chinese, the writing on the wall is clear.

[Aurornis]

To be honest, “buy the dip” is generally cope that people tell themselves.

The average investor isn’t sitting on a pile of cash just waiting to move it into the market. People investing periodically over decades have far more in the market than out. The “buy the dip” stuff ends up being a little bit here or there so they can convince themselves not to worry, not an appreciable swing in their portfolio.

[pton_xd]

"Buy the dip" is just code for "stay invested." Obviously most people aren't sitting on piles of cash.

[motorest]

> "Buy the dip" is just code for "stay invested." Obviously most people aren't sitting on piles of cash.

Not really. It's literally a call to action to counter what the market is doing, in hopes that it can prevent and recover trends. They are literally telling others to buy when everyone around them is selling.

[wombatpm]

My two favorite trading terms: “catching a falling knife” and “dead cat bounce”. You don’t want to buy until you’re sure it’s reached bottom. So you look for signs of rebound, but you can be fooled by a dead cat bounce. Because if dropped from high enough, even a dead cat will bounce before coming to rest.

[timr]

Being able to do the opposite of what others do is a useful quality to have as an investor.

I don't tell random people to "buy the dip" because I don't want to be responsible for the myriad dumb ways people interpret that advice, but it's not at all an unreasonable thing to say to someone who knows what they're doing.

[motorest]

> Being able to do the opposite of what others do is a useful quality to have as an investor.

Textbook example of survivorship bias.

[motorest]

> To be honest, “buy the dip” is generally cope that people tell themselves.

I don't think so. "Buy the dip" is a call to action to third parties to irrationally invest their resources in a way that benefits you personally. It's a call to not believe what they are seeing, and that doing the opposite of what would be prudent or reasonable is somehow something that is in their best interests.

You already hear fantastic claims like "buying the dip is what rich people do to get rich". Yeah, buy low-sell high is good business. But that only works when you actually buy low. If you buy in when the freefall starts, aren't you buying high? How is that good business?

[e40]

Buy the dip is what rich people do to get richer.

[Aurornis]

Rich people already had their money invested.

To buy the dip you need liquid cash sitting around earning very little, hoping the market goes down.

Reallocate portfolios if that makes sense, but much of the “buy the dip” stuff implies good market timing: To do it in meaningful amounts you’d have to pick the right times to not invest, accumulating cash at a lower rate, then you’d have to know precisely when to invest it again, switching it back into the stock market.

[arcastroe]

> Reallocate portfolios if that makes sense

Yes. This is one of the reasons 80 stocks / 20 bonds is a common strategy. The rebalancing "forces" you to buy low and sell high.

When stocks dip, your portfolio might become unbalanced at 70/30, so you reallocate funds to buy stock bringing you back to 80/20. Conversely, if stock market soars, you might get to 90/10, and selling stocks would bring you back to 80/20. Performing this balancing is, in effect, "buying the dip"

[hmcq6]

Survivorship bias