Buy the dip??

alfred64

MeteredOut said:

alfred64 said:

The charts indicate it is too early yet to buy.

Did the charts tell you it was going down 15%?

They're telling me it's going lower.

Hoenir

k6chris said:

I have read and listened to many comments about "buying the dip" but how do you know where the dip is until after any market has recovered?? 

Thanks!

Hence why those in accumulation mode are advised to continue drip feeding. 


Buying the dip is probably the lastest social media newbie investor game. The assumpton that the fog will quickly lift and all be normal again soon. In reality there's normally bear market bounces on the way down to the bottom. Financial reality isn't known for some considerable time until companies report and provide future guidance.  Markets are complex trading places beneath the surface. Unwinding multi layered positions takes a lot of time and creates no end of volatility. 

InvesterJones

WindfallWendy said:

I've taken £20k out of my premium bonds with a view to shoving it in my S&S ISA.... But thinking I might do a bit this week, a bit next month and maybe a third bit another time... Rather than shoving it all in now.

Thoughts?

What was your plan a week ago?

kimwp

WindfallWendy said:

I've taken £20k out of my premium bonds with a view to shoving it in my S&S ISA.... But thinking I might do a bit this week, a bit next month and maybe a third bit another time... Rather than shoving it all in now.

Thoughts?

My understanding is that statistically, time in the market beats timing the market. So statistically it's better to put all your money in now rather than drip feed. For a specific set of days, this might not be true, and psychologically, drip feeding means that while you might miss all of your money going up on the good days in that period of drip feeding, you also won't have all your money going down on the bad days in that period.

masonic

WindfallWendy said:

I've taken £20k out of my premium bonds with a view to shoving it in my S&S ISA.... But thinking I might do a bit this week, a bit next month and maybe a third bit another time... Rather than shoving it all in now.

Thoughts?

This is the halfway house between not wanting to miss out on the recent falls, while allowing yourself the opportunity to benefit if things deteriorate further.

Altior

Seems like some people have mixed up buying the dip with buying 'the bottom'.

Most equities are materially cheaper than they were last month. That's 'buying the dip', as they are almost certain to reach all time highs at another point in the future. So 'buying the dip' means buying into a drawdown and holding, not day or short term trading.

A simple example occurred very recently in 2020, when equity traders began to realise the prospect of developed economies deliberately cratering was real. You could be certain that the panic would subside, and everything would recover at some point in the future, nobody knew exactly how long it would take. Could have been counted in years.

You're effectively doing the opposite of what everyone else appears to be doing. So there's that element to the psychological challenge, the other element of it is that you're likely to make a paper loss in the very short term. 

Hoenir

Altior said:

Most equities are materially cheaper than they were last month. 

The impact on individual company profitability is totally unknown.  Shares are traded on future prospects. Even with the recent falls some US shares are still trading above historic long term averages. Markets eventually reset and realign with the real economy. 

Altior

Hoenir said:

Altior said:

Most equities are materially cheaper than they were last month. 

The impact on individual company profitability is totally unknown.  Shares are traded on future prospects. Even with the recent falls some US shares are still trading above historic long term averages. Markets eventually reset and realign with the real economy. 

It's not a recommendation! Just an attempt to elucidate what 'buying the dip' means.

Markets aren't nearly as sophisticated as everyone likes to think they are. Nearly all sentiment, and the sentiment has been with US, tech in particular, for a very long time. 

I have made my personal views well known on here, US equities were way overvalued on any reasonable measure. I was recommending moving to a cash position when 'risk free' yields on cash were comfortably beating inflation.

Quite often a drawdown exposes other cracks in the system. Personally I have been cherry picking individual income generating holdings on the inflated yield calcs. However, I'm staying predominately in cash for the time being. 

callum9999

vacheron said:

Just use regular automatic investments of a fixed sum of money and you will buy the dips automatically without even having to think about it. 

By the time you work out it was a dip, you're too late.  

Not remotely true. We're clearly in a dip right now and it's not too late. 

You can never know that you're buying the bottom of the dip, but it's clear that if you're buying now you'll be in the dip.

The only other option of course being it never recovers, in which case automatic investments is even worse anyway! 

Altior

'dip' buyers in clover!