If You Wait All the Time for the Dip to Buy Stocks or Crypto, Don’t Do It
Know when it’s time to dive
As an investor, your greatest wish would not be to buy on the dip.
Some investors can pee on their feet when the stock market dives. Others see an opportunity to dive even further and “buy the dip.”
2022 has just begun and there have already been many crashes.
When the S&P500 and Dow Jones indexes took a sharp drop last year, some investors started tweeting #BuyTheDip.
“‘Buy the dips” means to buy an asset (stocks or cryptocurrencies) after its price has fallen from an all-time high.
The policy here is quite simple: the new lower price represents an opportunity to buy bargains because the ‘dip’ is just a short-term market correction and the asset (stock or crypto) will, over time, likely recover and increase in value. “
The stock market can be extremely scary, and buying shares of good companies when the market is in a dip, from a behavioral perspective, can help aspiring investors invest and benefit from the market’s growth.
The Problem With Buying on the Dip
When financial markets are going through a sell-off (falling and rising in price), you may not have the courage to buy the dip because of your emotions.
Buying the dip is one of those things that works great in theory, but in real life, it doesn’t. Read it again.
It’s one of those moments that I personally as an investor struggle with because I want to buy the dip, but sometimes I don’t feel good when the market is falling. Buying the dip is the same as market timing.
Buying the dips does not guarantee the best returns. While you wait for a slowdown or lower point of the dip, you may be missing out on significant highs in the financial markets.
The problem with buying the dips as a standard investment strategy is that you can end up sitting out the markets for long periods of time when it goes up.
As you may know, it is almost impossible to know exactly when markets will fall to their lowest point during a given period, leaving many investors waiting for the perfect moment to buy good assets at banana prices. You may be waiting a long time.
Here’s what the guys on Twitter and Reddit don’t tell you about buying the dip:
If you buy an asset with a 1% dip, it won’t be extremely different than just buying every time you put your money in, because 1% dips happen quite often.
At the other end of the iceberg, there is this: “Buy, if the market falls 30, 40, or 50 percent from all-time highs.” You probably won’t invest if that’s the case, because markets don’t crash dramatically that often.
The mathematics of speculation in the markets is unforgiving, and the world of speculating markets tends to frame investments as “all or nothing.”
Know When It’s Time To Dive
If you are in a permanently leaking boat, you should invest your energy in changing vehicles, not in fixing the holes.
Success also includes knowing when you should get rid of an idea, a business partner, or, if necessary, your current employer.
It is not the end of the world to have made a wrong decision, but you have to learn from it and bear the consequences.
The definition of success is always personal, as success can mean something different to everyone. Financial security, family and career compatibility, or a great work environment.
Here’s What You Learn From Warren Buffett:
Don’t Be Overconfident
I try to invest in companies that are so wonderful that an idiot could run them. Because sooner or later someone else will.
Even though confidence is important, as the saying goes: control is better. Just like you, those around you have their own goals and they don’t always correspond to yours. So don’t rely on others to do things for you, do it yourself.
Be an Expert in Your Field
The risk comes from not knowing what you are doing.
Those who know their skills and know what they can do minimize the risk of failure. A popular example at this point is poker players. Is it really a risk for a world-class player to sit at the poker table?
Even a beginner can win with luck, but in the long run, the best player will prevail. To keep the poker metaphor alive, luck may win a hand, but better skill wins the tournament.
Think About Your Decisions
I insist that a lot of time is spent thinking. I read, think, and make less impulsive decisions.
Impulsive decisions can pay off and result in big wins, but because they are less well thought out, they can also backfire and cause big losses. Therefore, it should be your goal to make the most well-considered and factual decisions possible.
Proceed with Care
It takes 20 years to build a reputation, but only five minutes to destroy it.
Caution is the mother of the porcelain box or in this case, of the career. Your own reputation is damaged faster than you think. Therefore, attach special importance to how you present yourself to the outside world.
It doesn’t matter whether it’s contact with clients or a conversation with your boss or colleagues. Put the same level of care and professionalism into all your professional interactions, because you never know which one might be crucial for your career.
Don’t Make Things Worse Than They Are
The most important thing when you find yourself in a hole is to stop digging.
You can’t always climb out.
Mistakes and setbacks are part of life and career. What matters is how you handle mistakes and losses.
It often happens that trying to fix a bug only makes things worse. Success also includes recognizing when one’s own action is necessary and at what times it is the better option to wait and do nothing for the time being.
Maintain Your Network
You cannot do good business with a bad person.
A professional network is always an important factor in success. In a professional environment, these relationships are very valuable because they allow you to develop, exchange ideas and news, and benefit from the experiences of others.
Trustworthy people should also meet in a professional environment. Because you will not do successful business with people you do not trust, because they will not meet your expectations.
Final Thoughts
Success is not a sprint, but a marathon. It is not just about being successful as fast as possible. It is much more important to maintain and expand that success over the long term.