Perhaps the best investing strategy from March 9, 2009 (the official bottom of the financial crisis) to March 10, 2020 (the official beginning of our most recent bear market) has been to buy the dip, on pretty much anything.
Every correction seemed to be met with a rally, as valuation multiples continued to grow over time, and everyone and their grandmothers were pouring as much money into the stock market as possible.
As we’ve now witnessed, this “buying-the-dip” strategy in recent weeks would have turned out to be catastrophic for most investors, as downward volatility sucked stocks lower and lower each day following short-term advances that crushed all hope of a bottom every time.
In times of extreme volatility, like we’re in now, it’s generally best to sit on the sidelines and wait for the dust to settle, as this downward momentum has a way of crushing a buy the dip strategy.
That said, I would certainly encourage investors to pile up cash right now in preparation of a serious buying spree later this year when we see the VIX and other volatility indicators cool down, so holding tight and being patient will, in my opinion, greatly outperform a constant buying strategy right now.
Sometimes, the hardest thing to do is nothing.
Invest wisely, my friends.
