U.S. stocks recorded their worst January since the financial crisis and retail investors saw the downturn as an opportunity to buy the dip.

Mom- and pop- investors led purchases of U.S. equities during the month, while institutional investors such as hedge funds sold off assets, according to fresh data from Bank of America.

BofA’s retail clients were the biggest dip-buyers last month, posting inflows into stocks in each of the last four weeks. January inflows are typically led by retail clients following tax-loss selling, BofA noted, while institutional clients pour in during November and December after mutual funds' October 31 deadline for recognizing gains or losses.

"'Buy the dip' has been a strategy that's worked since there have been markets," Interactive Brokers chief strategist Steve Sosnick told Yahoo Finance Live. "You know, a lot of investors have been trained to realize that buying the dip works."

Federal Reserve anxiety has made for a volatile January for equity markets, with Wall Street’s major benchmarks rounding the month out in negative territory as traders adjust to the reality of a more aggressive central bank and a quicker pace of interest rate hikes than initially anticipated. The S&P 500 posted a negative return of 5.26% for the first month of the year — its biggest monthly drop since March 2020 and weakest January since 2009 — while the Nasdaq Composite narrowly avoided its worst-performing January on record after a loss of 8.98% for the month.

Stocks whipsawed last week after remarks from Fed Chair Jerome Powell following the central bank's two-day policy-setting meeting that strongly signaled a liftoff on interest rates to above their current near-zero levels was likely to come in March as policymakers look to tighten financial conditions amid a backdrop of surging inflation.

The S&P 500 tiptoed into correction territory last last week as investors mulled the hawkish policy shift but rallied into Friday to end 0.8% up for the full week.

Bank of America reported broad-based buying of the dip in its report, indicating that clients purchased both ETFs and single stocks last week and were buyers of equities across all three size segments. Clients buying the dip in U.S. equities recorded $5.5 billion in total flows to stocks, the largest sum since late November and eighth largest since 2008, per Bank of America’s data.

Despite a turbulent month, history supports the notion that buying stocks after major plunges has paid off. Research from Goldman Sachs that examines data going back to 1950 showed an investor buying the S&P 500 10% below its high, regardless of whether it was the trough, would have netted a median return of 15% over the next 12 months.