Bridger Capital Advisors, LLC

01/28/2026

Why buying the "dips" strategy can be a flawed. Please see comments from Mitch Zacks.

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“Buying the Dip” is a Flawed Long-Term Investment Strategy
Stocks have been on a roll over the past few years, with high double-digit returns from 2023 through the end of last year. But strong performance also has many investors concerned, especially those with extra cash on the sidelines. With elevated valuations and noisy headlines, I often hear investors say: “At these levels, I’d rather wait for a pullback before investing.”
In stock market parlance, this approach is commonly referred to as “buying the dip.” But recent quantitative research shows that such a strategy is flawed, and it can actually hurt investor returns over time.
To be fair, I understand the appeal of a ‘buying the dip’ approach. By waiting for markets to pull back, investors hope to capitalize by buying at a better entry point. It makes sense. But the issue is that historically, markets do not offer these types of opportunities as often as investors might think they do. Indeed, equities spend far more time near highs than in deep or prolonged drawdowns, and when pullbacks do occur, they tend to be short, sharp, and unpredictable. They also tend to follow strong rallies, which “buy-the-dip” investors often end up sitting out.
New quantitative research puts this all in perspective.
A recent study1 tested nearly 200 different “buy the dip” rule sets across long market histories. The findings: more than 60% of the strategies produced worse risk-adjusted outcomes (expressed as a Sharpe ratio) than buy-and-hold strategies. The shortfall wasn’t trivial: across the full sample, the average Sharpe ratio for dip-buying strategies was about 0.04 lower than buy-and-hold.
Notably, the results were even less forgiving in the modern era. Using a post-1989 sample through late 2025, the same research found the average dip-buying strategy delivered a Sharpe ratio about 0.27 lower than staying invested, roughly cutting the dip-buying strategy’s risk-adjusted effectiveness nearly in half. Put another way, over the past 35 years, systematically “buying the dip” created more risk for less return. Most investors don’t want that.
Why did the dip-buying strategies often underperform? Because of the structural cost of waiting.
Dip-buying strategies require investors to sit in cash while markets move. During strong periods, equities compound returns through earnings growth and reinvestment, while cash earns little by comparison. Missing even a handful of strong days can have a meaningful impact on long-term outcomes, particularly when earnings growth remains robust, as it did in 2025. As seen in the chart below, missing even just the 10 best days in the market over a long stretch can seriously impact returns to the downside.

For investors who might be waiting to “buy the dip” today, it’s important to reckon with the fact that earnings growth remains strong, while fiscal and monetary policy are factoring as tailwinds. Stocks are due for a pullback, sure. But how much longer could stocks potentially rally before that meaningful correction arrives? That brings up the question of opportunity cost, which “buy the dip” investors must consider.
Remember, waiting for a pullback is not a neutral decision. It is a timing call, and it’s one that history suggests is very difficult to execute successfully. What tends to work better than waiting for the perfect entry is participation with discipline. Dollar-cost averaging can reduce timing risk, while diversification and rebalancing allow investors to manage valuation concerns without stepping entirely to the sidelines. These approaches acknowledge the uncertainty without requiring precision or perfection.
Bottom Line for Investors
I do not want to dismiss investor concerns about valuation. The S&P 500 index trades near 22 times forward earnings, which is close to recent cycle highs. But valuation alone rarely determines short- or intermediate-term returns. In 2025, earnings growth was the primary driver of stock market returns, with roughly two-thirds of the S&P 500’s total return coming from earnings growth. The remainder was split between dividends and only modest changes in valuation multiples. Another strong year for corporate earnings could deliver a similar result.
At the end of the day, in environments where fundamentals remain supportive, the cost of waiting often outweighs the benefit of buying slightly lower—which again, is very difficult to execute.
– Mitch

09/30/2025

Mitch Zacks has written an informative article on risks in the market for the fourth quarter.


The 4 Risks Investors Should Worry About Most

Barring a sharp correction in the next few trading sessions, U.S. stocks are likely heading into the fourth quarter near all-time highs. I’ve made the case previously that steady, although fairly modest, economic growth paired with resilient earnings has supported prices to date. With the Federal Reserve poised to ease monetary policy as the economy expands, there is not a great case for being outright bearish.1
But that does not mean risks are low. Below, I outline four that I think investors should be keenly watching in the next quarter and beyond.
Risk #1: A Second Wave of Inflation

Among institutional investors, recession fears dominated earlier this year, particularly following the “Liberation Day” announcement. Today, it’s inflation that is again the top concern. August CPI data underscored this concern, with inflation coming in hotter-than-expected. The risk here is that the Fed will again have to reverse course, just as the market is baking in expectations for several rate cuts.
Prices for some goods may rise, especially where tariffs hit. But without the monetary backdrop to sustain a broad-based surge, the specter of runaway inflation looks overstated, in my view. Broad money supply growth in the U.S. remains tame (see M2 money supply chart below), though the trend line will be worth watching closely in the months ahead.

Source: Federal Reserve Bank of St. Louis2
Risk #2: Concern Over Federal Reserve Independence and U.S. Dollar Weakness

Fed policy is always political to some degree, given that appointments come from the White House and confirmations from the Senate. Removing Fed governors because of a disagreement over policy would be a major concern, but the Supreme Court already reaffirmed this year that such an act would be illegal. Public criticism of rate policy may seem threatening, but it’s also nothing new, and there is little evidence it has swayed decision-making from the Federal Open Markets Committee.
As for the dollar, “de-dollarization” chatter resurfaces regularly, with Russia, China, or the BRICS bloc often floated as challengers. Yet data show the dollar still comprises more than half of global currency reserves, and it is involved in nearly 90% of all foreign exchange transactions. No other currency matches the U.S. dollar’s liquidity, stability, and global reach. Over time, the dollar’s share may fluctuate, but fears of sudden debasement or collapse look misplaced.
Risk #3: Over-Concentration

Tech remains the market’s favorite sector, with AI-related companies driving much of 2025’s gains. In my view, this enthusiasm reflects strong fundamentals. Q3 2025 Tech earnings are expected to rise over 12% year-over-year on similarly strong revenue growth.
But with enthusiasm comes concentration. When too much capital chases the same trade, markets become vulnerable to abrupt reversals if sentiment shifts. For now, earnings support remains solid, but this is a reminder of the importance of diversification. Overcrowding isn’t a reason to avoid strong companies, but it does raise the odds of volatility if momentum cools.
Risk #4: Rising Long-Term Bond Yields

The summer saw 30-year yields in the U.S., U.K., France, and Germany climb to multi-year highs, sparking a wave of debt-crisis headlines. In Britain, rising gilt yields were pinned on budget concerns. In France, an offhand remark about an IMF bailout got blown out of proportion. In the U.S., some tied higher yields to worries about refunding tariffs should courts strike them down.
But a closer look reveals that rising long yields is a global issue. Italy, Spain, Canada, and Australia all saw long-term yields rise in tandem. In my view, and as I’ve written before, this trend is less about country-specific fiscal woes and more about sentiment flowing through interconnected global bond markets. Historically, modest increases in long rates alongside central bank rate cuts steepen yield curves, which is a setup that can support lending and growth.
Bottom Line for Investors

It’s a mixed bag right now for investors. Many are growing more bullish as 2025 closes, but worries also remain. Inflation, Fed independence, dollar stability, crowded trades, and rising yields all top the list. But it’s also true that these risks are widely known and widely discussed, which in my view reduces their power to derail the bull market.
For long-term investors, the persistence of these worries ultimately creates a constructive backdrop. Earnings continue to hold up, the Fed has begun easing, and the economy is chugging along despite headwinds. Volatility may flare if one of these worries dominates headlines again, or if the risk comes to fruition in a worse way than expected. That’s why I’m urging investors to stay focused on them.
– Mitch

01/13/2025

Bond yield's are increasing. What does this mean for investors?

Last week’s blowout jobs report has Wall Street wondering whether the Fed will continue its rate-cutting regime in 2025.

11/19/2024

CDs offer some risk. Working with a wealth planner will help navigate such risk.

The Other Side of the CD Story

Certificates of Deposit (CDs) are a popular choice among risk-averse investors, particularly during times of high interest rates. The allure of a fixed rate of return, combined with FDIC insurance, makes CDs an attractive option for those seeking safety and certainty in their investments. However, there are several reasons why investing in CDs at peak interest rates may not be the best financial strategy. Let's explore the other side of the CD story.

Rate Decline After Peaks

One of the key concerns with investing in CDs at peak interest rates is the historical tendency for these rates to decline significantly after peaking. Data shows that after CD rates reach their peak, they often drop sharply, which can substantially reduce the attractiveness of future returns. This decline means that the high rates available today might not be sustainable, and investors could find themselves with lower yields when they need to reinvest their matured CDs.

Underperformance Compared to Bonds

While CDs offer a fixed rate of return, they often underperform other fixed income investments such as bonds. Over both short and long-term periods, bonds, particularly short-term and municipal bonds, have historically provided better returns than CDs. For instance, a $100,000 investment in bonds can grow more significantly over one and five-year periods compared to the same amount invested in CDs. This underperformance can lead to missed opportunities for higher income and capital growth.

Lack of Capital Appreciation

CDs do not offer the potential for capital appreciation, meaning their value does not increase if interest rates fall. Unlike many bonds, which can rise in value as interest rates decline, CDs remain fixed. This lack of capital appreciation can be a disadvantage for investors looking to benefit from favorable market movements, limiting the overall growth potential of their portfolio.

Early Withdrawal Penalties

One of the drawbacks of CDs is the penalty for early withdrawal. If an investor needs access to their funds before the CD matures, they can face significant penalties that reduce their overall returns. This lack of liquidity can be a major disadvantage, especially in times of financial need or unexpected expenses, making CDs a less flexible investment option.

Reinvestment Risk

Reinvestment risk is another concern for CD investors, particularly in a fluctuating interest rate environment. Upon maturity, reinvesting in new CDs may offer lower rates if the interest rate environment has changed. This risk means that the attractive rates available today might not be available in the future, potentially resulting in lower returns over the long term.

Opportunity Cost

Holding money in CDs at peak rates can also result in significant opportunity costs. By locking funds into CDs, investors might miss out on potentially higher returns from other investment opportunities, such as equities or higher-yielding bonds. In a diversified investment strategy, it's crucial to consider the potential growth and income from various asset classes, not just the safety of CDs.

Conclusion

While CDs offer the advantages of a fixed rate of return and FDIC insurance, there are several compelling reasons to reconsider investing in them at peak interest rates. The potential for declining rates, underperformance compared to bonds, lack of capital appreciation, early withdrawal penalties, reinvestment risk, and opportunity costs all present significant drawbacks. Investors should carefully weigh these factors and consider diversifying their portfolios to include a mix of asset classes that can offer better long-term growth and income potential. By doing so, they can achieve a more balanced and potentially more rewarding investment strategy.

Footnotes For Data Used In Graph

1. CD Returns: The data for CD returns is based on historical trends where CD rates tend to decline significantly after reaching their peak. The initial rate used is 5.2%, and the decline rate is modeled after historical averages. This simulation assumes an exponential decay after the first year

2. Bond Returns: Bond returns are modeled using a linear growth rate. The starting point of 2% is chosen as a conservative estimate for bond yields, with an additional 0.5% growth per year. This is a simplified representation based on typical performance of short-term and municipal bonds

3. Equities Returns: Equities returns are simulated with an initial rate of 2% plus a 1.5% annual growth rate and additional volatility modeled by a sine function. This represents the higher volatility and potential for greater returns characteristic of equity investments over time

4. Early Withdrawal Penalty: A the annotation for the early withdrawal penalty is included to highlight the risk associated with withdrawing funds from CDs before maturity. This penalty typically results in a loss of a few months interest, which is a significant consideration for investors needing liquidity.

5. Inflation Risk: The horizontal line at 3% represents a topical long-term average inflation rate. This is included to show that returns below this line would result in a loss of purchasing power over time, Data for inflation rates are sourced from historical averages reported by institutions like the Bureau of Labor Statistics

6. Opportunity Cost: The shaded area between CD returns and bond returns represents the opportunity cost of choosing CDs over bonds, this area illustrates the potential additional returns that could be earned by investing in bonds instead of CDs. Historical performance data of various fixed Income instruments like municipal and corporate bonds were considered to model this.

7. Source of Data:

CD Rates: Historical trends and averages derived from FDIC data and financial market analyses.

Bond Yields: Typical performance data for short-term and municipal bonds from sources such as the Federal Reserve and bond market indices

Equities Performance: Based on historical market data and average returns reported by major stock market indices like the S&P 500.

08/02/2024

Patience is helpful at this time.

Strategists on Friday urged investors to take a cautious approach to a global stock market sell-off.

06/11/2024

Warren Buffett’s view of bitcoin.

03/25/2024

Coco prices are rising quickly. This article details the causes for the supply/demand imbalance.

Cocoa prices have soared to record heights as weather conditions worsen in the Ivory Coast.

12/26/2023

Small financial changes can have a large impact over time. You may have interest in this article.

As a personal finance reporter at CNBC, most days of the year, I'm at my desk talking to people about money. Here's some of the advice that has stuck with me.

09/19/2023

Mark Cuban's crypto account was hacked. He lost almost $900k. In the past, we noted this is a risk of holding crypto currencies.

Cuban said the scam could’ve been due to a malicious version of a crypto wallet he downloaded.

06/02/2023

As of May 25th, the positive performance of S&P 500 index, has been a result of only 6 stocks. Will the remaining 494 companies' stock start to contribute for the rest of the year?

Pls see the chart below for the six companies.

05/01/2023

It's early in the year, however, to date corporate earning have surprised on the upside. Attached is Mitch Zach's view.

03/10/2023

With Silicon Valley Bank’s siezure by the California regulators, we are all being reminded about risk adjusted returns. Is your Wealth Manager discussing this topic with you?

The failure of a prominent bank for tech startups is inciting fears of a 2008 repeat. Experts say not to panic.