Jannes Lorenzen has a skeptical opinion about buying stocks and ETFs cheaply. Getty Images
Jannes Lorenzen is managing director of JustETF. During his finance studies, he acquired stock market knowledge and has been investing in ETFs for around ten years.
In his experience, many investors invest in stocks whose prices have fallen. The 30-year-old speaks of a real cult surrounding the “buy the dip” strategy.
In an interview with Business Insider, the economist reveals several myths that you should know about buying cheaply.
The price falls, the stock becomes cheaper and is therefore a bargain. Or? “It’s a thesis that sounds obvious to many investors,” says Jannes Lorenzen. But this is not always correct. “Everyone imagines it to be easier than it actually is,” says the 30-year-old Managing Director of the financial portal JustETF is.
On the platform, users can, among other things, view the prices of ETFs and compare different ETFs. Lorenzen previously ran a blog under the name “Aktenrebel” with which, according to him, he reached beginners through to the super-rich with portfolios worth millions. He now leads a team at JustETF and has built up a considerable portfolio value for himself (Business Insider got insights into his portfolio).
In twelve years on the stock market, Lorenzen has always been cautious, especially when it comes to strategies surrounding the “buy the dip” cult. Because the approach sounds smart in theory, but looks different in practice. “In most cases, you only become wiser afterwards, i.e. after a low point,” explains Jannes Lorenzen. It is incredibly difficult to actually buy at the moment when a stock or ETF falls. Therefore the strategy is nothing more than an illusion.
What is the “buy the dip” strategy?
In the stock and financial context, “buy the dip” is a popular strategy. It is based on buying stocks or other securities after their price has fallen significantly in the hope that the price will recover.
The “dip” refers to a temporary decline in the price of a security. The idea behind this strategy is to purchase securities at a lower price and benefit from the subsequent price recovery. It is based on the assumption that the price decline is temporary and is not due to fundamental problems with the security or the market.