A Plain And Simple Dip-Buying Strategy On The S&P 500 Would Have Beaten Many Hedge Funds In 2023

Zinger Key Points
  • A dip-buying approach on the S&P 500 is showing the second-best year ever.
  • The average hedge fund would have lagged this straightforward trading strategy in 2023.

The year 2023 is on track to be the second-best year ever for the dip-buying strategy, which involves acquiring a stock or index after its price has fallen.

The S&P 500 index, which is fully replicated by the SPDR S&P 500 ETF Trust SPY posted an average of 0.3% in sessions following red days, posting the second-best return for this approach since 1927.

In 2023, bargain hunting has been a particularly effective strategy, as the stock market has rebounded swiftly and powerfully after expectations of Fed interest rate rises subsided and as earlier concerns regarding banks have subsided.

The fear of missing out on the next major rally (FOMO) is causing a repetition of the dip-buying hype that occurred during the post-Covid 2020 bull run.

Read more: Best Stocks To Buy On The Dip

"Going back to the 1920s, there has been no BTFD generation like you. Congratulations," Michael Burry wrote on Twitter.

“Markets had been pricing in an eventual Fed pause or easing which reduces pressure on debt-dependent companies, allowing for speculation to the upside,” said Que Nguyen, chief investment officer of equity strategies at Research Affiliates.

Simple S&P 500 Dip-Buying In 2023 Would Have Beaten The Average Hedge Fund: A dip-buying strategy on the S&P 500 would have returned 8% in the first quarter of 2023, considering that there have been 28 red days and 0.3% return in the session that followed each one.

That’s substantially more than the average return provided by hedge funds this year.

The Global X Guru Index ETF GURU, an exchange-traded fund investing in the highest conviction ideas from a select pool of hedge funds, is up by just 1%.

Read Next: Are Hedge Fund Short Sellers Hunting And Targeting Specific Bank Stocks?

Global X Guru ETF (GURU) price and return chart year-to-date – TradingView

Photo: Shutterstock

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