The stock market begins to crash, and as investors we begin to hear, “buy the dip”. The stock market (or any financial market for that matter) can never go straight up, so there will be those times where the ride gets pretty crazy. At times, the price action will simply be a correction; however, at other times, it will be a Bear market where stocks crash and prices go lower than you had ever planned. These are the moments where an investing strategy can begin to fall part and produce results that didn’t seem possible. What do I mean by “didn’t seem possible”? This is where the “bad logic” comes into play in regards to buying the dip as stock prices continue to fall. Let me be clear though, the logic “makes sense” and on the surface seems to match up with reality. If you are a beginner to investing into the stock market and looking to just get started, this apparent logical reality is why investing and trading can be so misleading. There are several areas on the market that make sense and are logical; however, from a strategy building perspective, it’s bad logic. To be fair, there are certainly times where buying the dip is a good thing and you should have strong hands as an investor during the turbulent times. With that being said, if you are using the kind of logic I discuss in this week’s podcast, you’re going to end up in some bad situations where your stock investment, literally, disappears.
