Catching Falling Knives? Smart Strategies for Buying Stocks in a Downturn.

Adria Cimino, The Motley Fool

Sun, Jun 8, 2025, 12:15 PM 6 min read

• Difficult market times may present an opportunity -- if you know how to plan for and manage them.

• To win in a tough market and beyond, it's important to invest for the long term.

• 10 stocks we like better than S&P 500 Index ›

As stock prices decline, you may feel as if you're at the world's biggest sale. Suddenly, stocks that seemed expensive weeks ago are trading at bargain valuations. You may be tempted to jump in and catch that falling knife, hoping you're buying at the best price. Of course, it's nearly impossible to time the market, so you're unlikely to buy a stock at its lowest and sell at its highest.

If you're a short-term investor, this could be a problem. In this case, it's risky to buy a stock as it's dropping because it may take a while for it to recover and go on to gain. Meanwhile, if you aim to sell in a few days or weeks, you may have caught the knife by the blade and find yourself recording a loss.

However, if you're a long-term investor, the picture looks much different. You can buy stocks during a downturn because, by holding on for five years or more, you're giving those companies time to recover and grow and the share price an opportunity to reflect that progress. Now, let's check out some smart strategies for buying stocks during a downturn.

Although on the one hand, those bargain stock prices may have caught your eye, you might still worry about investing when the general environment seems uncertain. What if current problems persist? What if stocks fall even further? Those questions could be running through your mind.

This is when it's a good time to consider what history has to say. My colleague Adam Levy recently wrote about what has generally happened after stocks fall into a correction, and this offers us reason to invest with confidence during these periods. The S&P 500 index (SNPINDEX: ^GSPC) has slid into the correction zone 15 times since 2008, Adam wrote, citing Dow Jones Market Data, and in all but two of those times, the index was higher a year later.

This means that corrections offer us a fantastic buying opportunity, one that will generally start delivering in the not-too-distant future. It doesn't matter when you buy during the correction; even if stocks continue to decline, your gain may still be significant once shares recover and travel through stronger market environments. So, the message here is not to hesitate to buy stocks during a correction. History shows that it's been a great bet for long-term investors.