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Retail investors bought the dip

Aug 8, 2024

Retail investors bought the dip

While U.S. company executives were sweating bullets, many retail investors saw Monday’s panic selling as a golden opportunity to snag some bargain stocks, according to data from Interactive Brokers. The popular U.S. retail trading platform doesn’t share daily data, but it does provide five-day moving averages based on client orders. Last week, Nvidia was the most traded stock, with an average of 83,000 more shares bought than sold. One day later, looking at the average from the previous Tuesday to Monday, the number jumped 17% to 97,000 — suggesting that there was a big increase in buying activity on Monday alone. Other popular tech socks, like Tesla and Amazon, saw a similar pattern according to data shared with Peak Money. This approach is known as “buying the dip,” and it’s a strategy that has paid off in the past. For example, Goldman Sachs analysts found that since 1980, the S&P 500 has returned 6% in the three months following a 5% drop from a recent high — something we’re currently seeing after an 8.5% drop from mid-July's peak. Be cautious when buying the dip though — only invest in stocks that have proven they have long-term potential for growth.

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