Does Buying the Dip Work? Every S&P 500 Drop Since 1928, Tested

"Buy the dip" is the advice you hear every time the market falls. Wait for stocks to drop, then pile in.

It's really two claims. The first is that a dip is a good time to buy. The second is that it's worth waiting for one. The first is mostly true. The second is where the money goes.

So we tested both. We used every daily close of the S&P 500 from Yahoo Finance, from 30 December 1927 to 30 October 2026. We found every drop of 10% or more from an all-time high, then checked what dip buyers got and what waiting cost them.

Finding 1: half the big dips kept going

Dips are common. Since 1928 the S&P 500 has fallen 5% or more from a high 73 times, and 10% or more 26 times. We count each stretch from one all-time high to the next as one drop.

The trouble is that a 10% dip doesn't tell you where it stops. 12 of the 26 went on to 20% or more, which is a bear market. 7 went past 30%.

So a dip buyer usually didn't buy the bottom. The median dip buy fell another 10.3% before the low. The worst was 1929. Buy on 4 October 1929, 10% off the high, and the S&P 500 then fell another 84.6%. It didn't make a new high until 1954.

The next three worst were 2007 (−51.9% more), 2000 (−42.7%) and 1973 (−41.9%). A dip buyer in any of those had to sit through a much bigger loss than the one they bought into.

Finding 2: a dip buy is an ordinary buy

Now look at what happened next. A year after buying at the first 10% close, the S&P 500 was higher 17 times out of 26, with a median gain of +11.4%.

That sounds good until you compare it. Pick any trading day since 1928 and the S&P 500 was higher a year later 70% of the time, with a median gain of +9.6%. Pick a day it closed at an all-time high, the day dip buyers avoid, and it was 71% and +10.1%.

The dip buy had a slightly better typical year, and a worse five years, because the five-year results include the 1929, 1973, 2000 and 2007 crashes. With 26 drops, neither gap is big enough to mean much. Buying in a dip was an ordinary time to buy. It wasn't a special one.

Finding 3: waiting for the dip costs money

This is the part people skip. Buying in a dip is fine. Holding cash until one comes is a different trade, and it has a cost: the market often rises while you wait.

Say you have a lump sum and the S&P 500 is at an all-time high. You decide to wait for a 10% dip. We tested that from every one of the 1,464 all-time-high days since 1928. The median wait was about 10 months. And 775 of the 1,400 times (55%), the dip came in above the price you'd passed up.

That sounds impossible, but it isn't. A 10% dip is measured from the high, and while you wait the high keeps rising. By the time the market falls 10%, it has often climbed more than 10% first.

Most people don't invest a lump sum. They save every month. So we ran that too. Put $100 in on the first trading day of each month for 20 years. One saver buys straight away. The other keeps the cash and only buys, with all of it, when the S&P 500 is 10% below its high.

We ran 947 of those 20-year stretches, one starting every month from December 1927 to October 2006. The saver who waited for a 10% dip ended up behind in 801 of them. Waiting for a 5% dip lost 840 times. Waiting for a 20% dip lost 614 times.

The gap was usually small, a median of −0.7% for the 10% waiter. That's because dips come often enough that the cash gets invested eventually. But it was a cost in almost every stretch, for a strategy that's meant to be an edge.

Finding 4: even perfect timing barely helps

Here's the strongest test. Imagine a saver who knows the future. They hold their cash and buy only at the exact lowest close of every 10%+ drop. Nobody can do this, so it's the best any dip buyer could hope for.

That perfect timer beat the plain monthly buyer in 458 of 947 stretches, or 48%. The median result was −1.1%.

The reason is simple. Big drops are rare, so the perfect timer sits in cash for years at a time. After the 1990 drop bottomed, the S&P 500 went until October 1997 without a single 10% fall from a high. The monthly buyer was invested the whole way up. The perfect timer was holding cash.

It isn't always a loss. From January 2000 the perfect timer is ahead, $182,000 to $144,000, because that start caught two crashes early. But that's a timer who never misses the bottom. A real one has to guess.

Finding 5: the last 15 years made it look easy

If you started investing after 2009, buying the dip has looked like free money. There were 6 drops of 10% or more since then: 2015, two in 2018, 2020, 2022 and 2025. A year after the dip buy, the S&P 500 was up 5 times out of 6, with a median gain of +17.3%.

Before 2009 it was 12 times out of 20, with a median of +8.7%. And the five dip buys that fell furthest afterwards, 1929, 1969, 1973, 2000 and 2007, all came before 2009.

That's likely part of why the phrase took off in the 2020s. A whole generation of investors learned the market during its friendliest stretch for dip buyers. The 1930s, 1970s and 2000s worked very differently.

What to do instead

• Invest new money when you have it. Waiting for a better price has lost more often than it's won.
• Keep buying during a dip. If you invest every month, a fall just means your next buy gets more shares. That's the useful part of buying the dip.
• If you have spare cash on top, a dip is a fine time to add it. Just don't keep cash out of the market waiting for one.
• Expect a dip to get worse before it gets better. The median dip buy fell another 10% first, and 12 of 26 became bear markets.
• Don't judge it on the last 15 years. Dip buying worked best in an unusually kind stretch.

Right now the S&P 500 is 3.1% below its 6 October 2026 high. Its last 10% drop was in March 2025. If you're holding cash for the next one, the record says you'll probably pay more for waiting.

Method, and what this cannot tell you

We took every daily close of the S&P 500 from Yahoo Finance, from 30 December 1927 to 30 October 2026. A drop is everything between one all-time high and the next: its depth is the lowest close in between. That gives 26 drops of 10% or more. For each one, the dip buy is the first close 10% below the high, and we measured the S&P 500 one, three and five years later (252, 756 and 1,260 trading days). We compared that with every trading day and every all-time-high day. Then we tested waiting. As a lump sum: from every all-time high, wait for the first close 5, 10 or 20% below the high, and compare that price with the one you passed up. As a saver: put $100 in on the first trading day of each month for 20 years, from every month from December 1927 to October 2006 (947 windows), and either buy straight away, hold the cash until the S&P is 5, 10 or 20% below its high, or buy only at the lowest close of every 10%+ drop.

• These are price changes. Dividends would add about 2-4% a year to every strategy while it's invested, so they slightly favour buying straight away.
• The waiting cash earns nothing in the main test. If it earns the 3-month Treasury bill rate (and the stocks still get no dividends, which flatters the waiter), the 10% waiter ends ahead in about a third of the windows and the perfect timer in about three in five.
• Before 1957 the S&P index had 90 stocks, not 500. Yahoo's series joins the two.
• Twenty-six drops is a small sample, and four of them (1929, 1973, 2000 and 2007) decide most of the bad results.
• The 20-year windows overlap, so the 947 of them are not 947 separate tests. They show how often each strategy would have won depending on when you started.
• No taxes, fees or trading costs. Those hit a strategy that trades more often, which here is the monthly buyer, but by very little in an index fund.