The S&P 500 is near an all-time high, trading near 22x forward earnings. Waiting for a pullback seems sensible, but research shows it may not be the most productive approach.
“Buying the Dip” is a Flawed Long-Term Investment Strategy
Stocks have been on a roll over the past few years, with high double-digit returns from 2023 through the end of last year. But strong performance also has many investors concerned, especially those with extra cash on the sidelines. With elevated valuations and noisy headlines, I often hear investors say: “At these levels, I’d rather wait for a pullback before investing.”
In stock market parlance, this approach is commonly referred to as “buying the dip.” But recent quantitative research shows that such a strategy is flawed, and it can actually hurt investor returns over time.
To be fair, I understand the appeal of a ‘buying the dip’ approach. By waiting for markets to pull back, investors hope to capitalize by buying at a better entry point. It makes sense. But the issue is that historically, markets do not offer these types of opportunities as often as investors might think they do. Indeed, equities spend far more time near highs than in deep or prolonged drawdowns, and when pullbacks do occur, they tend to be short, sharp, and unpredictable. They also tend to follow strong rallies, which “buy-the-dip” investors often end up sitting out.
After years of strong returns, many investors entered the year still waiting for the “right” pullback. History shows that waiting for perfect entry points often comes at a cost.
Markets continue to reward disciplined approaches over precise timing. Economic data and earnings trends are becoming clearer as the year unfolds.
Our latest January Stock Market Outlook Report 1 is grounded in the data shaping today’s market, showing where growth remains resilient, where expectations may be off, and how market leadership could shift as inflation, labor, and earnings trends evolve.
Inside this report, we examine:
Asset allocation guidelines for today’s market environment
Expert forecasts for inflation, rates, and economic trends
Industry tables and rankings to help you spot opportunities
Buy-side and sell-side consensus insights at a glance
And much more!
If you have $500,000 or more to invest, claim your complimentary copy of the report and see how shifting market trends could influence opportunities in the months ahead.
New quantitative research puts this all in perspective.
A recent study2 tested nearly 200 different “buy the dip” rule sets across long market histories. The findings: more than 60% of the strategies produced worse risk-adjusted outcomes (expressed as a Sharpe ratio) than buy-and-hold strategies. The shortfall wasn’t trivial: across the full sample, the average Sharpe ratio for dip-buying strategies was about 0.04 lower than buy-and-hold.
Notably, the results were even less forgiving in the modern era. Using a post-1989 sample through late 2025, the same research found the average dip-buying strategy delivered a Sharpe ratio about 0.27 lower than staying invested, roughly cutting the dip-buying strategy’s risk-adjusted effectiveness nearly in half. Put another way, over the past 35 years, systematically “buying the dip” created more risk for less return. Most investors don’t want that.
Why did the dip-buying strategies often underperform? Because of the structural cost of waiting.
Dip-buying strategies require investors to sit in cash while markets move. During strong periods, equities compound returns through earnings growth and reinvestment, while cash earns little by comparison. Missing even a handful of strong days can have a meaningful impact on long-term outcomes, particularly when earnings growth remains robust, as it did in 2025. As seen in the chart below, missing even just the 10 best days in the market over a long stretch can seriously impact returns to the downside.
For investors who might be waiting to “buy the dip” today, it’s important to reckon with the fact that earnings growth remains strong, while fiscal and monetary policy are factoring as tailwinds. Stocks are due for a pullback, sure. But how much longer could stocks potentially rally before that meaningful correction arrives? That brings up the question of opportunity cost, which “buy the dip” investors must consider.
Remember, waiting for a pullback is not a neutral decision. It is a timing call, and it’s one that history suggests is very difficult to execute successfully. What tends to work better than waiting for the perfect entry is participation with discipline. Dollar-cost averaging can reduce timing risk, while diversification and rebalancing allow investors to manage valuation concerns without stepping entirely to the sidelines. These approaches acknowledge the uncertainty without requiring precision or perfection.
Bottom Line for Investors
I do not want to dismiss investor concerns about valuation. The S&P 500 index trades near 22 times forward earnings, which is close to recent cycle highs. But valuation alone rarely determines short- or intermediate-term returns. In 2025, earnings growth was the primary driver of stock market returns, with roughly two-thirds of the S&P 500’s total return coming from earnings growth. The remainder was split between dividends and only modest changes in valuation multiples. Another strong year for corporate earnings could deliver a similar result.
At the end of the day, in environments where fundamentals remain supportive, the cost of waiting often outweighs the benefit of buying slightly lower—which again, is very difficult to execute.
To better understand how these dynamics are shaping the market as a whole, we turn to our latest analysis.
I recommend reviewing our January Stock Market Outlook Report 3, which examines how current economic and earnings trends are influencing market structure and investor positioning.
Inside the report, you’ll find:
Asset allocation guidelines for today’s market environment
Expert forecasts for inflation, rates, and economic trends
Industry tables and rankings to help you spot opportunities
Buy-side and sell-side consensus insights at a glance
And much more!
If you have $500,000 or more to invest, claim your complimentary copy of the report and see how shifting market trends could influence opportunities in the months ahead.
About Zacks Investment Management
Zacks Investment Management was born out of one of the country’s largest providers of independent research, Zacks Investment Research. Our independent research capabilities from our parent company truly distinguish us from other wealth management firms - our strategies are derived from research and innovation, including the proprietary Zacks Rank stock selection model, earnings surprise and estimate revision factors. At Zacks Investment Management, we work with clients with $500,000 or more to invest, and we use this independent research, 35+ years of investment management experience, and tools we’ve developed to design customized investment portfolios based on each client’s individual needs. The end result is investment management that is research driven, results oriented and client focused.
1 Zacks Investment Management reserves the right to amend the terms or rescind the free-Stock Market Outlook Report offer at any time and for any reason at its discretion.
3 Zacks Investment Management reserves the right to amend the terms or rescind the free-Stock Market Outlook Report offer at any time and for any reason at its discretion.
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This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. Do not act or rely upon the information and advice given in this publication without seeking the services of competent and professional legal, tax, or accounting counsel. Publication and distribution of this article is not intended to create, and the information contained herein does not constitute, an attorney-client relationship. No recommendation or advice is being given as to whether any investment or strategy is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole.
Any projections, targets, or estimates in this report are forward looking statements and are based on the firm's research, analysis, and assumptions. Due to rapidly changing market conditions and the complexity of investment decisions, supplemental information and other sources may be required to make informed investment decisions based on your individual investment objectives and suitability specifications. All expressions of opinions are subject to change without notice. Clients should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed in this presentation.
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Three Dividend-paying Satellite Investments to Buy in Profiting from the Sky
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Dividend-paying satellite investments to buy in profiting from the sky open the way to gain exposure to a growth industry that is gaining heavily from increased defense spending worldwide.
Investors have a chance to make the trend a genuine friend with income-paying equities. Stocks and funds both can be used to invest in dividend-paying equities that have strong potential.
One of the most contentious military conflicts is Russia's still-raging invasion of Ukraine almost four years after launching attacks against the country, as well as civilian targets. Russia's assaults are accompanied by death, destruction, attack drones and missiles.
The United States accused Russia on Jan. 12 of a "dangerous and inexplicable escalation" of its nearly four-year invasion of neighboring Ukraine as the Trump administration is seeking to arrange a ceasefire and advance negotiations for a lasting peace. Tammy Bruce, the U.S. deputy ambassador to the United Nations, criticized Russia's deadly launch of a nuclear-capable Oreshnik ballistic missile into a civilian area on Jan. 8 close to Ukraine's border with Poland, a NATO ally.
Three Dividend-paying Satellite Investments to Buy in Profiting from the Sky: HWM
Jim Woods, who heads the Investing Edge newsletter, recommends dividend-paying Howmet Aerospace Inc. (NYSE: HWM) in the Top 10 Growth Accelerators portfolio in the publication. Howmet Aerospace is a Pittsburgh-based advanced engineering company that is a traditional defense giant. It may be best known for providing key components in the F-35 joint strike fighter that hits Mach 1.6 under the thrust of potentially the most advanced engine on earth.
Paul Dykewicz meets with Jim Woods, who heads Investing Edge.
The joint strike fighter is built with cutting-edge materials, integrated airframe design and next-generation avionics to enable the fifth-generation fighter jet to operate with potentially unprecedented stealth, speed and agility in air-to-air and air-to-ground combat, company officials said. In developing the complex fighter jet, Lockheed Martin (NYSE: LMT) turned to Howmet to provide key parts that include single-piece, forged aluminum bulkheads that form the backbone of the aircraft structure and save 300 to 400 pounds per jet, while cutting costs by 20%.
The fighter jet also has titanium bulkheads and uses titanium to manufacture other airframe structures for all three F-35 JSF variants. Howmet further supplies single-crystal, nickel-based super alloy blades and vanes that operate in environments hotter than the melting point of the metal to propel the engine.
Howmet has soared 90.89% during the past year and nearly as much since Woods recommended it on January 15, 2025. The dividend-paying stock surged 3.26% on Jan. 2, reaching $211.71 per share. Like RTX, the stock also has advanced for the first full trading week of 2026.
"The present and future of armed conflict is drones, and Howmet Aerospace makes the engine and guidance components that make those drones fly," said Woods, whose resume includes a stint in U.S. Army special operations.
Howmet is one of two defense stocks he recommended on January 15, 2025, just before they both took off and produced large gains.
Three Dividend-paying Satellite Investments to Buy in Profiting from the Sky: LMT
Dividend-paying Lockheed Martin (NYSE: LMT), of Bethesda, Maryland, is a defense and aerospace company formed in a 1995 combination of Lockheed Corporation and Martin Marietta Materials, Inc. Under the proverbial radar, Lockheed Martin generates 15-18% of its revenues from satellite and missile businesses, said Michelle Connell, who leads Dallas-based Portia Capital Management.
Not only does Lockheed Martin have a strong presence in the satellite and space industries, that business segment's sales are growing 9%, Connell continued. As of the third quarter of 2025, LMT had a $38 billion backlog for satellites and missiles, she added.
Last December, the U.S. space development agency placed a $3-billion-dollar-plus order for 72 satellites, Connell counseled. In June 2025, Lockheed Martin announced the launch of its "AI Fight Club," a unit within LMT'S Technology and Strategic Innovation organization. That business unit focuses on AI for defense systems.
Income investors may be interested in Lockheed Martin's current dividend yield of 2.32%. The stock is up 23% year to date.
However, the company's share price "may be a bit ahead of itself," Connell concluded. Risk-averse investors may want to wait until the company reports its latest financial results on Jan. 29, Connell added.
LMT is a firm Citi Research buy recommendation. The stock rose 2.76% on the year's first trading day of Jan. 2, then jumped 4.72% on Jan. 9 alone. It has started the year strongly along with many other aerospace and defense stocks.
The company's key business segments are Aeronautics, Missiles and Fire Control (MFC), Rotary and Mission Systems (RMS) and Space. Lockheed Martin should produce improving margins, according to a Citi Research note.
Three Dividend-paying Satellite Investments to Buy in Profiting from the Sky: SHLD
The Forecasts & Strategies investment newsletter recommended a dividend-paying, broadly focused defense and aerospace technology exchanged-traded fund (ETF), Global X Defense Tech ETF (AMEX: SHLD), in its weekly hotline on Jan. 5. The recommendation followed the exploits of U.S. special forces that captured Venezuela's dictator Nicolás Maduro to face major drug trafficking and weapons charges in the United States. The ETF holds positions in the "best-of-bred" defense and aerospace companies that keep the world safe, said Jim Woods, who described it as one of his favorite funds. Woods is a former Army paratrooper who achieved an average return of more than 100% with two defense and aerospace stocks he recommended a year ago in his Investing Edge newsletter.
The biggest position in the SHLD fund is Palantir Technologies Inc. (NASDAQ: PLTR), a defense and cybersecurity company. The stock is up 114.75% in the past year since Woods recommended it.
Other top positions in SHLD include RTX Corp., Lockheed Martin, General Dynamics, Northrop Grumman and L3Harris Tech. Those stocks have been trending up higher than the S&P 500 so far this year. The fund currently is offering a dividend yield of 0.46%.
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Three Dividend-paying Satellite Investments to Buy in Profiting from the Sky: Geopolitical Risks
The conflicts around the world have boosted the demand for satellite services that offer military applications. Technology is increasingly important, with soldiers wary about going off to war and possibly becoming injured or killed.
Ukraine estimates that 200,000 of its soldiers are absent without official leave (AWOL), meaning they have left their positions without permission to do so, the country's new Defense Minister Mykhailo Fedorov said on Wednesday, Jan. 14. While speaking to the Ukrainian Parliament before his confirmation vote to become the nation's new defense chief, Fedorov added that roughly two million of his fellow countrymen are "wanted" for avoiding military service.
Fedorov's comments mark a rare admission from a top Ukrainian official about the extent of the problem. By law, all Ukrainian men between the ages of 18 and 60 must register with the military, but only those 25-60 can be mobilized. Amid Ukraine's martial law, all men 23-60 who are eligible for military service are prohibited from leaving the country, but tens of thousands have fled illegally.
After meeting with Fedorov on Jan. 14, Ukraine's President Volodymyr Zelensky said that "broader changes" were needed to fix the country's mobilization process.
Russia also has been incurring a wave of defections from its current and prospective combatants. The war in Ukraine is threatening to worsen further if Putin and his comrades in the country's leadership keep trying to deflect attention away from Russia's worsening economy and force its citizens to fight and die, despite limited territorial gains since the early phase of its invasion.
If a ceasefire is achieved in Ukraine, Britain and France have signed a historic agreement put peacekeeping troops on the ground in the war-torn country. The peacekeeping pact, signed at a summit in Paris by French President Emmanuel Macron, U.K. Prime Minister Sir Keir Starmer and Ukraine President Volodymyr Zelensky, could bring what has been called the "coalition of the willing" into a role to keep peace if a ceasefire occurs.
President Trump and his administration are supporting that initiative, as he seeks to broker a peace agreement between Ukraine and Russia. But Russia's role as the aggressor and demands to receive additional land beyond what it has seized on the battlefield is blocking progress. Recent polls indicate roughly 75% of Ukrainians who responded oppose offering any land to Russia. The opinion poll reflects the sacrifices endured by Ukrainians to defend their freedom and protect against Russia's sustained assaults.
Claims by Russia's leaders that they seek peace so far belie the reality of attacking non-soldiers, including Ukraine's mothers and children who continue to be killed and injured severely. To end Russia's invasion, President Trump is advocating prosperity that usually occurs for countries that have the greatest freedom.
Mark Skousen, PhD, the Doti-Spogli Chair of Free Enterprise at Chapman University in Orange County, California, is a free-market economist who travels the world to praise freedom as a conduit to open opportunities for economic growth across the globe. News reports offer a ray of new hope that President Trump may be able to arrange for three-way talks that would include leaders from Russia and Ukraine joining him in an attempt to finally forge a peace agreement.
Paul Dykewicz is an accomplished, award-winning journalist who has written for Dow Jones, the Wall Street Journal, Investor’s Business Daily, USA Today, Seeking Alpha, GuruFocus and other publications and websites. Paul is the editor of StockInvestor.com and DividendInvestor.com, a writer for both websites and a columnist. He further is the editorial director of Eagle Financial Publications in Washington, D.C., where he edits monthly investment newsletters, time-sensitive trading alerts, free e-letters and other investment reports. Paul also is the author of an inspirational book, "Holy Smokes! Golden Guidance from Notre Dame's Championship Chaplain", with a foreword by former national championship-winning football coach Lou Holtz. Follow Paul on Twitter @PaulDykewicz.
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