Does “Buy the Dip” Actually Work? A Look at Historical Market Crashes

“Buy the dip” is one of the most repeated mantras in investing—but does it really work? Should you be buying when markets are falling and headlines are screaming panic?

Let’s cut through the noise and look at how buying the dip has performed during some of the most significant market crashes in history.

What Does “Buying the Dip” Mean?

Buying the dip refers to purchasing stocks or assets after a significant decline in price, with the expectation that they’ll rebound. The idea is simple: buy low, hold, and wait for the market to recover.

But while the concept sounds easy, in practice, it’s psychologically tough. You’re buying when everyone else is running for the exits. So, does it pay off?

Major Market Crashes and the Dip-Buying Payoff

1. The Great Depression (1929–1932)

• Crash: Market fell ~86% from peak to trough.
• Recovery Time: 25 years (S&P didn’t return to 1929 levels until 1954).
• Buy the Dip Outcome: Those who bought in 1932 saw several hundred percent gains over the following decades—but it was a long and bumpy road.

2. Black Monday (1987)

• Crash: -34% in one day.
• Recovery Time: Less than 2 years.
• Buy the Dip Outcome: Investors who bought after the crash nearly doubled their money within a few years.

3. Dot-Com Crash (2000–2002)

• Crash: S&P fell ~49%.
• Recovery Time: 7 years (recovered by 2007).
• Buy the Dip Outcome: Buying in 2002–2003 gave you a ~100% return by 2007. Tech-heavy Nasdaq took longer to fully recover, but gains were significant for patient investors.

4. Global Financial Crisis (2008)

• Crash: -57% decline in the S&P 500.
• Recovery Time: About 6 years.
• Buy the Dip Outcome: If you bought in early 2009, you saw returns of over 400% by 2020.

5. COVID-19 Crash (2020)

• Crash: -34% in about a month.
• Recovery Time: Just 6 months.
• Buy the Dip Outcome: Those who bought in March 2020 saw their portfolios double within 18 months.

The Takeaway: Buying the Dip Works—If You’re Prepared

Historically, buying the dip has delivered strong long-term returns, but it requires:

• Liquidity: You need cash on hand when the market drops.
• Conviction: It’s hard to buy when fear is at its peak.
• Time Horizon: The biggest gains come from holding for years, not weeks.

Important note: Not all dips are created equal. Some recoveries take years. Timing the exact bottom is nearly impossible, which is why averaging in over time (dollar-cost averaging) is often more effective than trying to “call the bottom.”

Final Thoughts

Buying the dip isn’t a get-rich-quick scheme—it’s a mindset rooted in long-term belief in markets. While the past doesn’t guarantee future results, history consistently rewards investors who stay calm during chaos and stick to their strategy.

In times of panic, opportunity often hides in plain sight.