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John Authers

History Says Buying the Dips Is a Dangerous Game

Piling in at the wrong time after the dot-com bust could have left you out of pocket for more than a decade.

How do you know when you’ve truly hit bottom?

How do you know when you’ve truly hit bottom?

Photographer: SEBASTIEN BOZON/AFP/Getty Images

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If you get it right, there’s no doubt that buying the dips is a good idea. Anyone who bought the Nasdaq Composite at its intraday nadir last Thursday is already sitting on a profit of 7.5%. Spotting that particular dip, and timing when to get out again, are rather harder. We also know that ex-post, buying at the bottom is a really good idea. The great bear market troughs created historically great opportunities to buy stocks.