A $20 Million Loss Lesson: For Buying the Dip in U.S. Stocks, Just Remember These 'Three Dos and Three Don'ts'
"Losing 20 Million: A Painful Lesson on Bottom-Fishing in the U.S. Stock Market — Remember the 'Three Dos and Three Don'ts'"
The author shares hard-earned insights after significant losses, concluding that while timing the peak is crucial for A-shares, bottom-fishing is key for U.S. stocks. The U.S. market's long-term upward trend makes buying the dip a core strategy, though it is psychologically challenging for many investors accustomed to A-shares' volatility.
The article defines market corrections into three levels based on decline magnitude and duration: daily (5%+ drop or 2+ weeks), weekly (10%+ or 4+ weeks), and monthly (15%+ or 4+ months). Only 7 monthly corrections occurred in the S&P 500 over 20 years, each driven by macro events like rate hikes or crises.
The core of U.S. stock bottom-fishing is a disciplined, batched approach. The "Three Dos and Three Don'ts" are:
1. Do plan batched entries; don’t make impulsive trades.
2. Prioritize "buying enough" over "buying cheap."
3. Use time-based batches (e.g., buying every few weeks) over price-based batches.
For weekly corrections, a three-batch plan over ~10 weeks is suggested. For rarer monthly corrections, a 6-month plan with decreasing batch sizes (1/2, 1/3, 1/6) is advised. The strategy assumes the market’s long-term growth and relatively low volatility.
The article also categorizes downturns: natural pullbacks, valuation-driven adjustments, and systemic crises (e.g., 2008, 2020). While black swan events are unpredictable, the key is to respond based on evolving realities rather than trying to predict them. The ultimate advice: stay engaged, assess risks as they develop, and remember that even severe crashes eventually recover.
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