Often your instincts fail you.
As great stocks are falling like crazy, my instincts tell me to try and buy the dip. No way these great companies trade at these low valuations forever! I need to buy NOW. I need to catch some of these falling knives
NO! Buying the dip is good, trying to catch falling knives is bad. So often, you don’t know how far a stock can fall. Often you think, “it can’t cut in half again”, then the stock precedes to cut in half again. Don’t rush your thought process because of a falling knife.
I’m writing this, because I’m tempted to buy Netflix stock. Down 67% from its peak in a matter of months, this is a falling knife. I don’t need into rush into decisions because a company I’m interested in is down. I need to stop, think and wait. And that’s what I’m going to do. Wait. Think. Then who knows what.
*All of that being said, you don’t necessarily need to worry about any of this. If it suits you, just DCA and chill.