Bloomberg Businessweek March 9, 2020 pp22-24 “Should You Buy the Dip?”. “It’s a good instinct not to get carried away with the emotion of a falling market, but that doesn’t mean you should get aggressive instead”.
After 11 years of a bull market the S&P 500 fell 11% during the week of February 24. Some investors did jump back in causing a small rally that proved short lived. By 2244’s calculation as of the close Monday, the S&P500 is off 15% from its recent peak of February 21.
Financial consultants and professional traders advise against timing the market especially when companies are busy studying data before accurately updating projections of future earnings. Having said that, if your 401K is subscribed to ongoing buying, then you will automatically be buying into the dip much as you would be buying as stock values rise. This is not timing the market.
For investors entering the market after 2008, experiencing a dip is new and for all investors such a fall serves as a “gut check” for one’s risk tolerance. A plunge like this does give pause but action may not be necessary. Many retirement investors participate in funds that automatically maintain the proper balance of risk to safety based on your age and time to retirement. Theoretically, if you are properly calibrated your retirement account should reach your investment goals by the time of your retirement. In reality, many did act promptly making the week of February 24 “among the busiest five-day trading periods in the last 20 years…”. “…almost all of the recent activity was savers moving”…away from equities to fixed income.