US retail investors are enjoying record profits by buying stocks during downturns this year, with a total of $155bn poured into US equities and exchange-traded funds. This is the biggest profit since the early stages of the Covid-19 crisis in 2020.
The Nasdaq 100 index has risen 7.8% this year, but investors who bought during previous sessions have seen a cumulative return of 31% over the same period. Experts say that the “buy-the-dip” strategy has become increasingly popular among retail traders, with many predicting it will continue to work well.
The trend is driven by investors’ confidence in the market’s ability to rebound after falls, and by the success of past trends. This year’s returns are the best for a hypothetical dip-buying model since 2020, and the second-best return on record since 1985.
However, some experts warn that this strategy carries risks, particularly if prices surge before being cashed out. They say that a “president who likes to surprise people” could lead to higher volatility, making it more profitable for investors to buy low and sell high in trending markets with stable policies.
Despite these concerns, retail investors remain a significant force in the market, and their faith in the “buy-the-dip” strategy is unwavering.
Source: https://www.ft.com/content/d73a6ddc-d0a7-4aa7-bfbd-809c120cf19d