When stocks I having been watching fall into correction territory, that's a time to buy. An investor friend told me not to go all in with the first purchase. Keep some cash in reserve to give yourself the option of buying more if the price continues to tumble.
A lot of folk hesitate when faced with a buying opportunity. They want to to time the market. They want to buy at the moment the stock hits bottom. This is almost impossible. The bottom is only clearly the bottom when the stock is well into recovery. Many claim, with good reason, that buying during the recovery is the best way to play a bear market.
Look at the chart of the CIBC stock price. The high for the year prior to the March 2020 crash was approximately $115.87. A correction kicked in when the CIBC stock dropped 10% to $104.28. If one bought some CIBC at the 14% correction mark, it would have been about three months before the stock revisited the correction purchase price. That's not a long time if you consider it would take almost a year for an investor who bought at the high to see his money returned.
The CIBC stock bottomed out at about 42% off its high. If you made your second buy at the 32% down level, you wanted to be fairly certain the stock price was recovering, you would have walked away with a real steal. The stock would have been selling for approximately $78.80. The recovery paused at this point, a little bad luck, these things happen, but you still would have climbed into the green on the second buy within weeks.
What have we learned? I'm not really sure. I do know my wife and I made out very nicely during the March 2020 crash. I bought the correction. She bought the bear. Now, to check some more stocks and some more charts. At some point, I believe there is a lesson here.
