Buy The Dip
39m | Jan 22, 2022On the anniversary of the first huge GameStop 50% surge hosts Michael and Austin talk about Buying The Dip As A Trading Strategy.
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Back to another episode of the long run show. This is Austin with my co-host here, Mike, and we are going to be talking about buying the dip today.
Very interesting phenomenon that I think we've seen play out. Over and over and over again, this year, I'm in the markets and it's been a bit of a ride and I've actually, I actually have a little story to launch us in, but, um, Mike, if you have anything to add on the intro here, um, yeah, feel free. Yeah. I, I.
Add on that there's been, I feel like stock market means and phrases have begun become such a, a common piece of, of a called the lexicon of pop culture in the last few years, which is really interesting. And I, I, you know, we were kind of titling in our minds. We're titling this kind of a bias. And what does that mean?
And you know, how do we have you try and predict where the market is heading and stuff like that. But I think it was the moon to the moon. Yeah, exactly, exactly. I mean, we've been there before the, a buzz Aldrin and Neil Armstrong have been there before, so we'd always go back. But, um, anyways, anyway, I think that the, the, the focus of this is, is kind of, you know, the psychology of how do we figure out.
Bear markets, bull markets, you know, w w what's going on and, and like, is buying the dip possible? Is it a, is it a real strategy? And you know, maybe some, some we can discuss some FOMO, all sorts of stuff, but I, I'm excited to dig in and I'm excited to hear what your story is as well. Yeah. So I was watching a YouTube video as I am want to do.
Um, and I, this particular one was a video talking about. Um, actually, I can't even remember the full televideo, I think was talking about a recent IPO or something. And then they talked about the market in general, in broad terms. And the, the host just offhandedly said, oh yeah, you can basically just draw, draw a trend line.
He was like, almost making a joke, but like only half making a joke. He said, you can basically just draw a trend line along the, uh, the high points of the S P 500. And then whenever it just goes below that just by, and I was like, Well time out here, like it can't be quite that easy. I mean, I know we've been in a humongous bull run before, you know, all the craziness of 2020, and then of course there was a huge yourself and a huge rebound, I mean, an explosive rebound odd to all time, new highs.
So it's interesting because you know, Draw a trend line and buy below that trend line every time and be all set or, you know, I obviously, from a mathematic perspective, you'd probably better off just dollar cost averaging in, but that got me thinking about this whole trend of buy the dip, buy the dip, and it seems like.
Up until, you know, maybe, maybe recently the Thanksgiving around Thanksgiving, we had had some selloffs the day after Thanksgiving was pretty bearish red day for all the markets up until that point. Like, we didn't have a lot of hard sell off this year and it seemed to be. That EV every one of the talking heads on the new shows was just talking about how investors were buying all of these dips.
And therefore none of the dips were dipping to, to, uh, really lean into it there. So it got me thinking, okay. Is that all you have to do is just look at the S and P 500. By every dip that comes along and you'll be all set. I don't think it's that easy. I think probably you're, you're better off dollar cost averaging in, and that takes out a lot of the psychology, which we can definitely talk about.
You mentioned FOMO and FID and all that stuff. Yeah. We can dive into that, but it was just a very interesting thought experiment for me going, huh? Maybe, maybe there's something to that. Maybe, maybe I should pull up a chart. Look at that. That's really interesting. And I think it. It strikes upon my first, very first question will be like, well, how do you define a dip?
You know, is it, is it, are you trying to define one is like the, was the YouTube we're trying to define one is a day like an intraday dip. Um, or was it over a week or is it over a month or a year? You know, he was using the like month or six month chart. Wow. So there's so many different ways to even look at what a dip could be, that.
Really interesting. And I mean, I like this stickers around the benzene office that just say by the dip, it's almost become a meme in and of itself, which is that always concerns me. Like there's there, there's, there's something to be said about not going with the crowd and not going with the consensus.
And that tends to be a very smart thing to do. However, it seems like at the, at the same point when you're talking about. Such a bra. Market and, and okay. It's only 500 stocks, but it's the 500 largest companies the most financially successful, or at least supposed to be the most financially successful companies in the United States.
That's a pretty big. Data pool when you're talking about that, there is some wisdom in the crowds, right? And that's why we have this whole invisible hand of the market and efficient market hypothesis. And we can, you know, we can debate that and everything, but there is something to be said about the wisdom of the crowd.
And so it almost makes you wonder, okay, well then do you just apply that and, and, and hope for the, you know, hope for the best, but you're just a fly that and go, okay, this, this dip falls below my. One year or six month chart trendline. So I'm going to buy right now, does it, does it really make sense? And I always think whenever it's a meme or whenever I see a bunch of people doing it, I'm always skeptical because things can never be that easy when something's promised to be very easy typically with the markets.
It's not quite as it seems. So that's what concerns me initially. But yeah, I mean, I think if you, you, you really need to define a dip. To. You know what by the dip means. Um, but it's, it's different than, you know, a dip on a single security, which could be caused by a lot of different factors. Some may be fundamental to the company.
Some may be not right. It could be a sector wide sell off or a market wide sell off. And so then you're getting a great company and a discount. So it makes sense to buy the dip there. But when we're talking about a collection of 500 or the largest. Most financially successful company in the United States.
Does that make a difference, um, in the whole buy the dip? Does it, does it make it always right? Instead of only sometimes. Right. Um, I, I, I find interesting that you brought up, you know, the wisdom of the crowds and not swimming along, you know, kind of with the, with the current. But my, my question would be, you know, how did the dip happen in the first place?
Cause he a big, fast dip would have to be a very large chunk of the market. And that kind of the big crowd as has already made their decision in the case of a big dip and they're all selling off. So when you're buying the dip, are you kind of therefore going against the crowd, even if you're, even if you're within some.
Smaller community of market participants who, you know, kind of a spouse, those beliefs and believe in rebounds and stuff like that is, is, but is that then just simply a microcosm of the crowd. It's a smaller crowd, but it's another crowd that you're going along with. Well, yeah, I was thinking it was.
Smaller crowd. That would be a microcosm, but it does align with some great wisdom from, you know, the likes of, of Warren buffet. I almost said Jimmy buffet, it's definitely not one. You should be taking stock from Warren buffet who always says, always says, well, yeah, there's money to make money to be made when there's blood in the streets or, you know, the, the tide goes out and then you really see who.
Swim shorts on. Um, and so, you know, it sounds pretty Jimmy buffet. So I guess maybe the related should dig into that a little more. Um, so I guess it almost does make you a. Oh, what is the word I'm looking for? You're going against the consensus contrary. Yes. A contrarion, which I always like to be, but, um, it does make you a bit of a contrarian, um, if you're buying the dip, right.
So is that the right move? I don't know. I think it needs to be, I don't think you can just rely on that indicator alone, which is why. I think this, this story I told at the beginning of that, that host kind of making the joke of the trend line on the S and P 500, just offhandedly. I think that's what he meant was like, okay, well, yes, you, this is a really act for right now during, during a bull run.
So I really. Great, um, indicator, but it needs to be paired with market sentiment and larger macro trends that will help you understand a little bit more. Um, what's what's really going on there, but what do you think you think you can just buy the dip every time when the S and P and be good to go? Yeah, I think that there is something to be said about the.
The capability of black Swan type events, which are essentially just means like something that really no one sees coming, which is it's impossible for the market. To predict it. And so the whole efficient market hypothesis only, only affects things that are widely known, which is why I personally don't believe in the mission work and her bias, the efficient market hypothesis.
I think it's bubkis I know the options are always priced in on public information, but so many people already it's in don't know all the information. So I am a firm disbeliever of efficient markets hypothesis. Shoot me a message on LinkedIn or something. If you want to argue with me about it, but don't worry, Gilder read George Gilder, and I'll be arguing with him a little bit in a future episode, but I think I might lose.
That's all I'm going to say now, but anyway, um, so I think that there's always, I mean, there's always the opportunity. If you, you buy at a, a perceived. And it could just be the start of a, of a horrific bear run. Um, and I think buying the dip, necessitates an optimistic mentality over the long run, which I agree with.
I espouse that mentality of, you know, I expect innovation to continue to grow. I expect market conditions to improve over time because of innovation because of. New ideas and new ways of doing things that, and I think there's, there are some people who believe that the only reason why economic growth occurs is population growth.
That is patently false. Well, yeah, that's, it's complete bogus and there are plenty of arguments around that. And I think that just very, yeah, very incorrect. Um, so I am of the natural optimistic viewpoint. However, there are some. Dips that, you know, it could simply be a first indicator of a bigger problem.
Um, you know, in the long run buying those dips could be good for, like you're saying like the overall S and P 500, I think that's probably pretty safe. Um, but if you're buying the dip of an individual stock or even a small sector or something that I don't know, I feel like that could get, could get a little more dangerous and it is a little more high.
Yeah, it definitely isn't. What's the comment. Interesting to think of as I was when you said, well, maybe by maybe that dip is, is the initial phase of something worse. I was thinking, okay, well, what happened if you bought at the beginning of the financial crisis, as things were going down, like, well, yeah, that would have taken a couple of years for you to rebound, but now you'd be sitting really pretty.
So it, it almost all of this, all of the talk of. Buy the dip on the, you know, on the SB five, but again, I'm strictly speaking of the S and P 500, if you're buying a broad index fund or ETF, um, then it almost is a moot point. Whether you buy the dip or your dollar cost average and just fricking buy something, please don't just sit on the sidelines.
Right. That's that's the whole, that's the whole thing. It's like, if you had bought the beginning of the 2000 and. Three years later, you would have made your money back. If you, if you dollar cost average to all the way through 2008 and just kept your head in the sand, you'd be good. Um, so again, that's the concern, the very, very conservative risk averse side of me just saying, okay, well I'll just buy it.
Doesn't matter how you buy, just buy please. And then you you'll be fine over the long run, but that's because I have a very. Um, a very optimistic view as well, probably a little bit tainted by your optimistic view, Mike, but, but I do have an optimistic view of, of, you know, the, the business. World and the economy and us, especially, and innovation as a whole, because I, I, in all of my, um, studying and reading of history, it seems.
Humans always find some way to do something better and more, either more efficiently or just better in general. Um, and it seems like that, that, that is the case. Now there are definitely, um, ways that, you know, I guess you'd call them in the economic term to delight Mike here, you'd call them a negative externality.
That's unforeseen, um, from, you know, something Y. The fed or some geopolitical, um, uh, you know, for instance, Russia invading Ukraine or China invading Taiwan or something along those lines that that would have huge effects. Those, those are, those are. Big issues that could cause a dip that could be very, very, very deep and longstanding.
Right. Um, if, you know, for instance, if for some reason the fed just totally misses the mark and mismanages inflation. Well, that could be a very, very bad problem for the markets. Those those sorts of things. It depends. It all depends on your time horizon, right? Because those sorts of things could eventually, as long as, you know, as long as a business and the economy of the U S kind of survive and we don't have an apocalypse, um, those sorts of things will work themselves out over, over a period of years.
Now it might take a while, but, but that, that is the case. They will work themselves out. So it almost seems to me like, Like buying the dip or, you know, debating whether you should buy the dip is kind of a, uh, what sort of, what, what's your goal. And then what's your time horizon because you really need to take those two into account and decide, okay, what what's gonna one scratch your itch.
Cause maybe you're buying the dip to just scratch the itch of, I want to have some fun and see a great percentage return. And also maybe it's just a time entertainment thing where it's like, oh, they get to have some fun here and buy the dip. It's like, okay, well, that's fine. But maybe for your real investing portfolio, you want to do something like dollar cost averaging, or maybe you do look at it and go, okay, I'm going to be really disciplined about this and not use, you know, I almost opposite FOMO, fear of missing out on buying the dip to force you into making rash decisions around, you know, a market reversal.
Just a bump along the road. So it there's so many factors that go into it. It's hard to, it's hard to give a blanket statement, whether it's a good thing or not, I guess. Well, you had something to add there, Mike, go ahead. Yeah. I just said to two quick things was one where I think that's a good, a good distinction you made of the S and P 500 and not because I think to be honest, I think if the 2008 crash happened now, And the same, the same thing that happened.
And, and let's say, I didn't know anything about the background of CDOs and traunches and stuff. And I see Lehman brothers and bear Stearns, you know, the price drop in 70, 80% of the day. I probably would have bought a bunch of like, oh my gosh, like these are great businesses. I know these by name. Like these are well-known investment banks, buy the dip, buy a bunch of.
And then it just goes to zero, uh, like very unexpected. So I think, I think that's a good distinction of buying the dip in, in some sort of index that is reweighted and refitted on a regular basis. It's filtered and filtered. Exactly. I think that's a. Probably a very important distinction. Um, and then the second one, again, kind of mentioning what you, what you said about, you know, over the course of years, even events that can be considered like very serious, you know, let's say Russia, invades Ukraine, and brings NATO into a war and this some sort of cold war ESC.
More hot war as kind of happenings in Eastern Europe, a warm war, a warm war. Hopefully there is no war, but maybe let's say a warm war. Um, I mean, barring some sort of apocalyptic, there really aren't any game ending events that could befall the, the, the economy and stock markets that wouldn't make you worried over this better.
If any kind of game ending apocalyptic event happened to them. You would be worried much more about yourself and your loved ones than you would be about the markets and your money. And then at least that's my hypothesis. At least I hope you exactly. Well, the thing is, I mean, yeah, I've, I've, I've heard it put before, basically, if you, if, if there is such a large issue that.
We're having some sort of apocalypse and it really causes that much damage. And basically up ends our financial system and everything just explodes and goes to zero. And there's nothing left at that point. You're going to have to figure out how to use bushcraft and survive on your own, because that means we're literally in a chaos situation and there's no rule of law.
Okay. So that sort of thing I think is fine to prepare. If you want to prepare for that GoPro go be a doomsday prepper. That's fine. But it doesn't make sense to, I at least I don't think it makes sense to necessarily have that approach. When you're talking about your own portfolio. Now you should be prepared for some, some negative trends you see, or some, you know, maybe you don't like certain.
Companies or the way they run. And so you have some maybe moral or ethical reasons not to not to buy those, or you think there's going to be a huge problem with whatever sector and you know, maybe think gas is going to be obsolete. So you want to get out of gas and oil stocks. Okay. That's fine. Those things you can prepare for, you know, individually in your portfolio, you don't need to be, it makes no sense to me wasting time on worrying about the apocalypse with your portfolio, because you're doing just that you're wasting time.
Like you said, if it gets to that point, you've got much bigger, much, much bigger issues. I would say the best index fund you could buy for the apocalypse would be. And a basket of first aid kits and possibly ammunition and a lot of unique style DTF. That would be a very physical ETF in your basement or something.
Right. I'm talking like pounds and pounds of food, quite literal basket of goods, not some basket of goods made up by a bunch of accountants that doesn't exist anyways. Um, yeah, so I think the buy the dip when it comes to the SMP. It's interesting. I also wanted to ask you what you thought of it, if that sort of attitude throughout 2021.
Cause there was a lot of people who missed out on the amazing bull run from. Uh, from, you know, March, I think it was March 23rd, for some reason that date is seared in my mind, March 23rd, 2020. Um, but from that point that, you know, the absolute bottom of the market in 2020, a lot of people missed out on that.
And so in 21 it seemed like no one wanted to miss out on. So they didn't want to miss out on the bottom. So they kept buying. And also of course we have, you know, it was impossible to have any sort of bond portfolio because those were just getting hammered all year. So people were looking for, they were looking for returns, but it seems like that sort of sentiment or attitude played into the.
Pretty much just linear progression of the markets. It seemed like in 20, 21 now, again, I'm talking high level about S and P 500. I'm not talking about, you know, small caps or mid caps or particular stocks, but it seems like that sort of attitude really permeated a lot of the news. So I'm interested to see what w what, what, what do you think were the effects of.
Um, for this, this past year, 2021. I like that because I think that gets back to what we first discussed of the psychology of buy the dip of FOMO, of, of these kinds of almost meme, investment ideologies, um, that, that kind of grow and changed due to the market and due to the psychology of the, of investors within it.
And I think that, I think you hit the nail on the head of that. The idea that the, the market kind of, you know, had an opportunity in March and maybe a good number of people took it, but it seems like most didn't. And that kind of, like you said, that boiled over and kind of quickly jumped into this flywheel effect of course, of the car across the course that across the course of the next, you know, year or so, a very interesting flywheel effect.
And what I find interesting is a similar thing. Kind of happened in crypto as well in that, um, you know, you have the crypto markets. It's interesting to hear arguments both in favor and against that crypto is, um, correlated to stocks it more recently. It definitely seems to be more correlated to stocks, uh, when we're, especially in small and mid cap tech stocks kind of thing, um, which is a whole, a whole ball game.
And, uh, you look like you have something to say that well, that definitely, I mean, it definitely deserves a deep dive in an episode, but just thinking. Our current theme here that might be driven less by a fundamental correlation and more by a psychological correlation. Hm. That we're, you know, we just discussed how everybody was afraid of missing out.
And I think you were building to this, so I'm hoping, I hope I'm not stealing your thunder, but like everyone was afraid of missing out on the equity. Rebound the stocks rebound. So it was, so it was everybody in crypto and we've seen waves, you know, Bitcoin, the classic top dog there, you know, went way up and wake came crane crashing way back, down and way back up again, had a nice run and then come back down a little bit as we record this.
But, um, so we've had, you know, a lot of volatility, which everyone knows is typical in the crypto market, but you know, you were just saying yesterday, it's amazing to think Ethereum. A few hundred dollars a couple of years ago, and now it's multiple thousands of dollars. So it does seem like there has been some FOMO, which is not necessarily, I guess, that doesn't totally correlate to buy the dip, but it seems like the correlation between the two might be one, the.
Access of retail investors to, to these different assets. And also, um, which I think is great. I think it's great that we have more market participants. Whether, you know, a lot of people are annoyed by that. They're like, oh, the retail investor, they're not smart enough to participate in price discovery. And I say, you know what they are, they have, they can with Benzinga pro they can have the same resource.
That even some, uh, people with Bloomberg terminals have. So I say that's a great thing, more, more market participants, the better, but that has led to, I think more access leads to almost a heavier weight towards that wisdom of the crowds mentality. And, and again, The same. It seems like the same people who would be afraid of missing out in stocks would be afraid of missing out in cryptos and therefore would drive a lot more attraction and traffic towards both of those markets.
Um, therefore almost smoothing out the bumps in the road, um, you know, towards a positive direction. But again, we're, we're fairly young and we haven't experienced a long bull run. Most of our life has been a long, almost decade. Bull run. We haven't experienced a very long bear run, so it'll be interesting to see.
What we, what we experienced over the next, will this turn into stagflation again? I don't know. Yeah. Who knows? Yeah. Stagflation, maybe it's on the rise and maybe it's not. Um, we, we did talk about inflation earlier in the year and how I thought it was not transitory. And clearly it's not, the fed has since, uh, I know crystal ball sear, but the Veta since dropped the whole transitory idea and they're no longer team transitory.
Um, but anyways, I, I think, yeah. Some psychological, uh, correlation and not necessarily a fundamental correlation. That's a really interesting point. And I don't, I don't, I haven't heard that from either side. Um, I liked that because it does seem like the same people who would be interested in buying the dip on equities would be interested also in buying the dip on cryptocurrencies as well, which is very interesting because it seems like the same psychological reaction, right?
It's like, oh, this is, this is on discount. Percentage return, therefore I'm going to buy. Right. And so same thing in crypto. Everyone saw the beginning of 21, 20, 21. Everybody saw the huge run up and people making millions upon millions in returns. And so it definitely attracted a lot more market participants, but, um, we're still not anywhere near anywhere near peak it option with crypto.
I don't think, but yeah, that's another, another, that's a whole nother honk. Um, but it's interesting almost a psycho demographic. Correlation. Yeah. Leave it up to the, the economists guy to just come up with some crazy terms. Psycho demographic. I am neither psycho, nor am I a demographer, but I'll go with that.
That sounds about accurate though. It seems like, it seems like there would be no reason for them to be correlated. It's not like all these big tech names hold crypto. So it's not like their values would be correlated to the military. So it seems that there must be some thing else driving. It seems to be a correlated correlation.
And again, correlation doesn't equal causation. So that's something to keep in mind too, just because it may have happened in the past. Doesn't mean it's going to happen in the future. So don't go drawn trend on some crypto index. That's not what I'm saying. There's gotta be, it's gotta be out there, but it's still like a crypto 10 index or a crypto 15.
No, but there's talks. I keep up regular. Some of the more boring side of finance. So we're talking, you know, kind of like, like the barons of the world and you know, that, that sort of thing. Um, not necessarily the fun meme stocks on Reddit, but, um, there is talk of making. A crypto index so that there can be products based on that some ETF type products, but of course, with the sec and our entire federal government, not knowing what to do with crypto, it makes it really hard to put together any sort of ETFs based on that, because the sec just doesn't know what to do with them.
Um, and that that'll probably continue for a little bit, but eventually I think there will be, I think you'll have some sort of some sort of index, but, um, if you haven't listened to the crypto episode, we put out, um, I can't remember what episode number that is, but definitely go back to that, that episode.
We talked about the, the great calling as Mike coined the term. Um, and I think you'll see some sort of index come on. Because there'll be less coins and less tokens out there. Um, and you'll probably see some sort of index. We constantly try to apply. The same sort of tools to new ideas. And so I see no reason for there not to be an index eventually.
Yeah. That's a good point. I definitely agree that there's been, uh, even just the last year, an enormous uptake of like using equities methodologies in crypto. Yeah. And using those tools. Yeah. Yeah. Yeah. Definitely. Well, I don't know if we have discovered whether or not you should buy this. But what would be some of your, uh, your takeaways here, Mike, for, if someone's looking at their portfolio going well, what am I doing about this whole dip?
The FOMO? What, what are you thinking? Yeah, it's interesting because I think like we talked about at the beginning, you gotta, you gotta define the dip in terms of. Your own strategy as well. You know, if you're looking for individual stock dips and stuff that that's not as guaranteed more risk, probably more reward in the short term.
Um, you know, if you, if laymen and bear Stearns, hadn't gone clearly bankrupt and survived, you know, maybe they'd be doing great today and maybe you've made a ton of money buying them, uh, when they were net 90% down or something like that. But they went bankrupt. So there's always that risk with, with individual stocks.
Um, so I think that I th I honestly, uh, like the, the Austin low risk approach of there's a dip in the S and P you know, that might be, might be a good place to do it. Um, I think buying the dip in a broad index, like that is probably a pretty solid plane, right. Again, if you look at historical, uh, records for the market for a long period of time, whenever there's a big crash or something, I mean, it has so far always rebound.
Like we, like we talked a barring, you know, some sort of apocalyptic event. Really you shouldn't be worried about your portfolio. Uh, that happens if there's an EMP that wipes out all the power grids or nuclear war or a comment or something like that. Um, maybe you'll be worried cause you have got to get the money out of there fast enough to go and buy some food and water or something.
But, um, I would, uh, I would hope that this, uh, you know, hopefully that doesn't happen and even, even large-scale global, I mean, even looking at. Like COVID was really considered kind of an apocalyptic ESC event for awhile. Um, and in some ways it kind of, it's been a minor apocalypse is what I would categorize it as, as, um, as, uh, a very, uh, minor form of, uh, uh, I mean, it hasn't been a world changing event.
There's been a paradigm shift in. Yeah, how we approach things similar to a world war, both world wars have created very distinct paradigm shifts and were almost mini apocalyptic style events that, you know, pretty much all aspects of life were changed in a lot of countries. Uh, so, so COVID has been kind of one of those really unique, uh, events and we've seen the market.
Crash when it happened and come back very steadily and then jump back this year. Now, the question is how long will code would go on? You know, we've got the honor crime, we've got all sorts of. Stuff going on and speculation. So, you know, who knows, maybe it could get worse and become a zombie virus. And we have a real talk, a little big event.
So there's so much, there's so much unknowns. Uh, but just say that not sourced and definitely speculation. Wondering, I just want to assure everyone that's not.
Yes, that is very true. Very important to note is 99.9% chance that COVID will not become a zombie virus. I would probably add a bunch more decimals on there, and that's also not financial. I don't know what stock to pick for a zombie apocalypse. That's that'd be a fun episode. Stock picks for apocalyptic different apocalypses like that space X.
Uh, something, I don't know what you'd pick for zombie. We have to think about that. But anyway, so, uh, barring something like that, I think, you know, for myself, and it sounds like for you as well, Austin, that in the long run optimism is warranted due to human innovation due to technology due to increases in efficiency and convenience.
And, uh, I don't, I don't see. Even slowing down that is, that is sped up dramatically. Um, even though we have, you know, the situation of Moore's law and specifically in computing, we haven't necessarily seen a Moore's law translate into a lot of businesses and a lot of other categories. And who knows, quantum computing might blow Moore's law and with water, there's so many different things to consider.
And I think, I don't know, my, my absolute takeaway from this is. Yeah, maybe by the dip and the S and P when it, when it goes down, that's I feel like that's, again, not financial advice, but I don't know if you're optimistic like us. Maybe that's the right point. What's your dad's. My, my takeaway is that if you're strong enough mentally to.
No Y and set rules for yourself and strong enough to follow those rules when it comes to buying the dip on the S and P 500 specifically, I think that's okay. But if you're a person like me, who just is pretty, I can get very easily swayed. Um, and I'm, I'm not necessarily the most disciplined person, which is why I don't do active trading.
Um, then at least right now, maybe I will eventually, but right now I just don't do that because I want them to busy. And to know that I'm, I'm pretty easily swayed. Um, so if you have good rules set around it, I think it's okay to buy the dip. You have to define what it is. You have to have a trend line that you're comfortable with all of that.
But, um, I think really just if you're going to buy the S and P 500. For a long time anyways, the most efficient way to do that time and time again has been proven. Mathematically is just dollar cost averaging just by the same amount on the same day, every month, no matter what. And it's kind of an ostrich approach, but you can always do that with the large portion of your portfolio in the hand, have some fun with cryptos or NFTs or.
Real estate or single stock picks and just have fun with a smaller portion of your portfolio, just to scratch that itch. Um, but that's, that's personally what I'm doing. Just that's that's my take on them on buying the dip is I, I, I, my thought process is that it's not really worth the. That it would take to monitor when to buy the dip.
Now, if you want to, you totally can't I think it's a valid, a valid strategy. I just don't know that it's worth the effort you might as well. If you're going to hold it. Position over the long-term over the long run. You should just dollar cost average. And anyways, I think that's more efficient. That's a good point because the question is where do you get the liquidity to buy the dip?
Do you always have a dip fund? That's kind of sitting around waiting for, waiting for a dip. How do you so salsa dip, but yeah. Where do you get the liquidity? Because if there's a big dip and you're invested in the stock market, chances are you just lost a ton of liquidity and you're probably better off just holding rather than selling everything and buying, you know, an S and P 500.
And. Right. Hoping that it's going to go back up. So, I mean, maybe, maybe for people that's a legitimate thing, have a dip fund that, uh, is sitting around waiting for something. But I think, you know, in normal, like you said, the psychic effort required and continually monitoring, or even just having the, the funds.
That's a lower opportunity cost perhaps, uh, or opportunity, you know, you're, you're paying an opportunity costs by just leaving funds around, waiting for waiting for something to happen. Yeah. Um, and then a quick caveat as well. I know, I just said, you know, maybe yeah, maybe by the S and P 500 dip is the right play.
I personally would never do that. So I have never, I have never owned a S and P 500 index and I don't plan on doing it. So I'm glad that we have both sides of the perspective. 'cause I, I do, and I do own an S and P 500 ETF and I will continue to probably throughout my life. Yeah. But, well, that's a whole nother conversation.
So I think, I think for today, I think Mike, you, you kind of put your stamp of approval on it. It could be a legitimate strategy. You just would never do it. And as for me, I think there's more efficient ways to buy into the broad market as a whole. Well, that's been this, uh, this episode on the long road show.
We, if you would, if you liked this episode or any others, please give us a five star review on whatever podcast platform you're listening to us on. Um, and we will look forward to talking with you next. On some new subject over the long run. Yeah. Thanks for listening. And, uh, we'll, we'll catch you later.
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