Market Bottom: ‘Once You Really Hate Yourself, Buy Lower Than You Thought Was Possible’

Ben Carlson, portfolio manager at Ritholtz Wealth Management, is all in on “buying the dip.” 

History would say there is a considerable amount of evidence to support buying whens stocks swoon sharply.

“Fifty-six percent of the time, stocks were higher one year later. Seventy-two percent of the time, they were higher three years later. And they were higher 80% of the time five years later,” said Carlson.

These profit margins came after some of the biggest crashes in stock market history, such as Black Monday and the Great Financial Crisis.

The S&P 500 Index is down more than 20% year to date.

“So let’s say as long as we don’t have another Great Depression, the track record of seeing stocks higher 1, 3, and 5 years later following a huge down month in the stock market is pretty good,” Carlson says.

“Every investor’s told to buy low and sell high. But most don’t realize that buy low typically works out to buy low, then buy lower, then buy even lower, and once you really hate yourself, buy lower than you thought was possible.”

Goldman warning

The catalyst behind the stock market’s dismal has been the impact of the coronavirus, COVID-19. 

Goldman Sachs previously warned investors that a deep correction in equities was possible due to the coronavirus.

“We believe the greater risk is that the impact of the coronavirus on earnings may well be underestimated in current stock prices, suggesting that the risks of a correction are high,” wrote Goldman Sachs board member Peter Oppenheimer.

“Equity markets are looking increasingly exposed to near-term downward surprises to earnings growth.”