Spurred on by a recent Chart of the Day email, here’s a look back at my 18 month old observation of why it pays to buy on the dips when the news is at it’s worst.

From May 18, 2009:

An Index Fund Investor’s Dream: S&P 500 Earnings Nearing Historical Lows
Image Source: Chart of the Day

Fast forward to present day November 19, 2010:

Thanks to a number of factors — the Federal Reserves POMO program, Bernanke’s “reflate or kill the U.S. Dollar trying” mantra, shifting investor psychology, etc. — the market has performed quite well rewarding investors who bought during the doom and gloom news with a 35% ROI (mid 800s to 1200) from the original observation.

Not too shabby for an index fund.