Should You Buy The Dip?

Should You Buy The Dip?

Are you keeping an eye on the technology stock sell-off? The tech sector pulled back quite a bit recently. Is it a good time to buy into this overpriced sector? I’m not sure, but I finally got over my fear of tech stocks. I avoided technology stocks for many years because I was gun shy from the previous tech crash – the Dot Com Bubble. Back then, I was a new investor and had a big percentage of my net worth in tech stocks. When the bubble burst, my portfolio took a nosedive. Since then, I’ve been a lot more conservative and avoided tech because they always seem so expensive compared to other stocks. Mostly, I invested in index funds and solid dividend stocks. This is a slow and steady strategy. Our portfolio grew steadily and we have done well over the years. However, we missed out on the spectacular gains of the last few years.

Now that we are more solid financially, I can afford to take more chances. The ongoing technology stock correction is giving me the opportunity to put a little money in growth stocks. I’m pretty conservative so this will be just a small portion of our portfolio, probably less than 5%. That’s enough to get the blood pumping, but it won’t hurt us if tech stocks stay down for an extended. Many tech stocks never reached the height they achieved in 2000. For example, Intel’s stock’s high was $75.81 per share back in August 2000. It hasn’t reached that level in 22 years. Most of my net worth was in Intel back in 2000. Do you see why I’m aversed to tech companies and tech stocks?

INTC stock sell off crash

Tech stocks correction

Wow, tech stocks really cratered over the last several months. Let’s check on a few big names. (2/12/2022)

NVDA – NVidia’s 52 week high was $346.47 per share. Recently, it dropped as low as 219. That’s a 37% decrease. NVidia is a good company to buy if you believe in Metaverse and gaming. They make powerful graphic cards and chips. I picked up a few shares over 2 purchases. This method spreads it out a little so the average price was around $250. I put in an order at $220, but it didn’t fill. Oh well. You rarely can buy at the perfect bottom.

Meta – Formerly known as Facebook. Meta’s 52 week high was 384.33. The price per share dropped to 220 and might go down further. That’s a 43% drop so far. Meta is pushing the Metaverse hard and lost a ton of money last quarter. They also lost some users and they are fighting new regulations in Europe. I’m not a big believer in Facebook so I’ll pass on this stock. Also, I think the Metaverse has a long way to go. It’ll take many years to get the equipment to a user-friendly level.

NFLX – Netflix’s 52 week high was 700.99. The recent low was 359.7, a 49% decrease. Yikes! I don’t watch much TV so I don’t know what the fuzz is all about.

SHOP – Shopify’s 52 week high was $1,763/share. The recent low was 809. That’s a 54% decrease. They are an e-commerce company. 

Many high-growth tech stocks are dropping like rocks. There are several reasons for this. Inflation is heating up and it will be more expensive to borrow money to fund those expensive research and development programs. Also, the tech sector has done so well that their valuations were very high. These reasons led professional wealth managers to rotate out of tech to value stocks. These value stocks didn’t do as well as tech over the last two years so their valuations are a lot more reasonable. Also, they usually perform well in high inflation periods. Oh, the geopolitical issue in Ukraine isn’t helping either. That looks like it might be spinning out of control.

YTD performance

The tech-heavy QQQ index has fallen about 11% since the beginning of the year. That’s not too bad considering how terrible big-name tech stocks performed. Although, only the big decreases made the news. There are plenty of solid tech stocks that dropped about 11%, like Microsoft, Cisco, and Intel.

In comparison, our net worth is a lot more stable because our investments are a lot more conservative. Our net worth dropped about 2%. That’s the value of a conservative portfolio. Your net worth is a lot more stable during down markets.

My recent tech stock purchases are okay for now.

I purchased NVidia at the average price of $250. It last closed at $239.50. Not great so far, but it’s an opportunity to average down further. I’ll put in some orders next week.

I also purchased Unity Software for about $90/shares. On Friday, it closed at 111.35. That’s not too bad at all.

Tech stock will be quite volatile this year. There will be a lot of ups and downs. If there is another big correction, I’ll pick up a few more shares. We still have many years until we need to sell these stocks so we can afford to wait for recovery. That’s really the key. If you can afford to wait out the volatility, you’ll probably do well by buying the dip. That’s the secret to wealth – keep investing.

What about you? Did you pick up any tech stocks recently? 

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Joe started Retire by 40 in 2010 to figure out how to retire early. After 16 years of investing and saving, he achieved financial independence and retired at 38.

Passive income is the key to early retirement. This year, Joe is investing in commercial real estate with CrowdStreet. They have many projects across the USA so check them out!

Joe also highly recommends Personal Capital for DIY investors. They have many useful tools that will help you reach financial independence.
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12 thoughts on “Should You Buy The Dip?”

  1. You said

    “ The tech-heavy QQQ index has fallen about 11% since the beginning of the year. That’s not too bad considering how terrible big-name tech stocks performed. Although, only the big decreases made the news. There are plenty of solid tech stocks that dropped about 11%, like Microsoft, Cisco, and Intel.

    In comparison, our net worth is a lot more stable because our investments are a lot more conservative. Our net worth dropped about 2%. That’s the value of a conservative portfolio. Your net worth is a lot more stable during down markets.”

    You are down YTD? My conservative blue chip dividend portfolio is up YTD over 4%.

    Banks, telcos, utilities, pipelines and a couple REITs. Nothing fancy, just the basic steady Eddie’s.

    Value is boring, but it works.

    Reply
  2. I ended up buying some more recently during the dip, but I just continued to buy the whole market with more shares of VTI. It is a little more fun to play with individual stocks here and there, but that game stresses me out too much. I kept a few stocks like Amazon and Google years ago when we moved everything VTI, so I still have something fun to watch, but I haven’t bought others since. Good luck with your new purchases!!

    Reply
    • Good move. I’m planning to move some money from bonds to index funds if the market drops more. No hurry, though. I think it’ll be pretty volatile this year. Great job with Amazon and Google. I sold my Amazon shares a long time ago. 🙁

      Reply
  3. I think I get plenty of tech expose in my mutual funds. Bought some FZROX in a taxable account earlier this year with the proceeds of a real estate sale. If it’s still down in value in 6 months I’ll sell to do some tax loss harvesting. (Hmmm…I’ll have to check how that works if held less than a year. Last time I was able to tax loss harvest was 2010 or so.)

    Reply
  4. i’ve bought a few tech shares the past couple of months. as you know i already have owned a lot of NVDA and SHOP for a huge gain but the sell-off still hurts. even if it’s temporary it still feels a little rough.

    i bought more unity and also airbnb last week. they should all be fine over a long time horizon. happy investing!

    Reply
    • I should have purchased NVDA way earlier. But as I mentioned, I was still scared of tech stocks.
      But now, I’m using a small account to take some chances. Even if we lose some money, it won’t be a big deal.

      Reply
  5. I bought some Facebook when it went on sale – not much. I love the Oculus, but I don’t know if it will go mainstream ever. The hardware is pretty amazing though. It takes a lot to get my wife interested in technology and the Oculus does it.

    Alphabet has continued to do quite well – so some tech companies aren’t getting hurt by inflation. I shifted away from tech last year by buying more HDV (high-dividend stocks) instead of VTI (Vanguard Total Stock Martket). It’s doing well because people need oil and consumer staples. There’s a lot of tech in VTI because the biggest companies in the US are tech companies.

    I didn’t know that Unity was publicly traded. I’m just learning now that it’s the engine behind so many popular games. I’ve been thinking about taking a beginner’s programming course in it – just for fun.

    I don’t know if I’ll buy more tech here. Maybe there will be bigger dips as the Fed starts raising interest rates.

    Reply
    • I just don’t see it going mainstream unless it gets better. The Oculus is so awkward and cumbersome.
      It sounds really cool, though. Maybe I’ll put it on our Christmas list this year.
      We have plenty of dividend stocks because I thought Mrs. RB40 was going to retire. But she didn’t so I’m done with dividend stocks for now. We don’t need more taxable income at this point.

      Reply
      • I didn’t buy the high-dividend ETF for the dividends. I bought it for the underlying reason that they are boring consumer staple and energy companies that people need no matter what. I felt that they’d be safer and so far it’s mostly worked out. I do it all in my retirement accounts, so there is no taxable income.

        Reply
  6. No I haven’t ….but am considering buying maybe getting VGT or maybe ARKK (or cherry pick from their portfolio … ) …closer to the March increasing interest rates … also watching the Russia thing …

    Reply

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