Why Buying the Dip Is A Terrible Investment Strategy
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- เผยแพร่เมื่อ 19 ก.ย. 2022
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ABOUT ME
While still working as a trial attorney in the securities field, I started writing about personal finance and investing In 2007. In 2013 I started the Doughroller Money Podcast, which has been downloaded millions of times. Today I'm the Deputy Editor of Forbes Advisor, managing a growing team of editors and writers that produce content to help readers make the most of their money.
I'm also the author of Retire Before Mom and Dad--The Simple Numbers Behind a Lifetime of Financial Freedom (amzn.to/3by10EE)
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When I hear "buy the dip", I don't think of someone who holds cash waiting for a downturn. I think of someone who sees the market is down and thinks, "in addition to my regular investing/DCA, I am going to add another $500/mo I would normally spend."
That's me. I just add a little extra.
that strategy is fine
Your strategy is outperformed by the following: if there is $500 per month in your budget that you don't need to spend, invest it instead of spending it regardless of what the market is doing. Timing your monthly investment rate is still market timing.
Just did the same thing today. I saw the best price I’ve ever seen for a Trijicon ACOG sight today and decided to pass on buying it because the market is down so much. I’m buying the dip instead. Just investing above and beyond what I have been doing regularly.
Rob gaffed he made it sound like you have to be totally out of the market. To buy the dip.
As a long term investor, when the dip gets to a certain amount on a stock/etf, I always take advantage of it. If it keeps getting lower, I'll keep buying what I can.
Buying dip is bad investment strategy as with inflation all asset price goes up. However, it is a good tactical, especially it aligns your asset allocation and as a part of portfolio rebalance.
I love this channel. Excellent info.
This information is most useful during regular market conditions, you can’t wait for a crash, you’ll likely lose out. However right now we are in the midst of a 20-30% downturn so sure right now is a great buy since the market HAS ALREADY crashed and you’re not waiting.
Essentially, if you’re already in the middle of a recession/downturn and you have lots of cash currently on the sidelines, it’s great to invest your remaining cash.
Great video, thanks Rob! Enjoyed the Nick Maggiulli article, great follow up.
Decades ago, the legendary Jack Bogle was asked, "When is the best time to invest?" he replied, "When you have the funds to do so". People never learn though, so every generation reinvents the wheel.
Nice video. Very easy to follow and good to know the easy route (Dollar Cost Averaging) is the best thing to do.
Thank you. Great info.
Great video. Thanks
Great video!
As or more eye opening then the dividend videos. Thx from 🇨🇦
I had a great run 2008 thru 2021 and was 100% stocks. Retired at 59, pulled 30% went to cash, money market. Getting 2.5% on cash and going up….. No risk of principle like bonds. Made the decision that bonds were not the place to be with a rising rate environment.
I still remember the last issue of ROM, still a great comic. Thank you for the analysis and rational discourse.
No music, perfect. Overhead Mic sounds great! Thanks @Rob Berger
I worked on some post-production audio editing and then listened to it on our surround sound before publishing it!
What a great video Rob thanks
I'm like @Jonathan Martin , when I hear "buy the dip", I think of using discretionary dollars I would normally not invest to buy a stock that is 'on sale'.
Paul at Everything Money needs to see this. Great video. At first I was confused because I thought ‘buying the dip’ was ‘DCA’. New subscriber. Long GOOG
Insightful. Does DCA'ing being better than Buying the Dip over a long period of time hold true in a volatile market like the cryptocurrency market as well? Or would a volatile market like that mimic the 1920's and 1930's stock market where buying the dip could be more profitable?
DCA is a winning strategy! Worked well for me for 30 years. Not changing that now. Buy and hold.
Basically market timing does not work. I also have seen arguments that taking your RMD all at once over time is not as good as taking periodically over the year.
The same thing applies to all your retirement withdrawals. Because statistically the stock market goes up more than it goes down
That is very surprising.
Good discussion, but one thing is missing. What about smart DCA, where you don't wait but do a more market-based DCA, based on some momentum indicators, such MACD or RCI. I have been following a MACD-based strategy that aggressively puts more money as the market goes down. Will it outperform the naive DCA?
Hey Rob, reading your book rn and it’s very good! I’d recommend it a friend new to investing
It makes more sense to focus on when to sell not when to buy, anytime the MACD crosses down on the monthly chart it's time to sell if you're a long term investor and time to buy when the monthly MACD recovers. In the last 25 years this has only happened 5 times and if you followed it you'd be beating the market significantly, as long as the monthly MACD isn't giving sell signals.
usually you dont leave money under the mattress waiting for the dip, you deploy it in other opportunities. so another interesting analysis will be to assume you can make 6% while waiting for the dip. Any how it is just to theorize.
stay the course and you will be rich!
I automatically liked the video because I knew the video was going to be good! I think if investors want to "buy the dip" they should just invest additional money during a dip if it makes them feel better, It would make me feel better because then they are investing more, and that's almost always good.
For example: You make $5,000 per month. You invest 25% of your income or $1,250 per month. The rest is spent or saved to be spent later. Then a market downturn occurs. You can now decide to forgo some spending and invest an extra 10% of your income that month ($500). So you ended up "buying the dip" with an extra $500 instead of spending it. You just made a big win psychologically and mathematically.
Looks like a home run to me analysis. Thx, Rob!
In the long run buying the dip does work. However, like Bogle once said, if you have a strong reason to believe that the market in the short term due to maybe some current or up coming events it's fair to say it's better to hold off and buy later. And right now the US economy and the markets look bad and are only going to get worse, not just here but markets and economies around the world. Unfortunately self inflicted and until the policies change or shift course things will continue to struggle and tank. Simply bad economic policies, all political and we're all along for the ride. So with that said, I'm waiting until the bad policies shift or get blocked some how.
Perhaps, I don't know, something like a covered call strategy would be valid... Increased income payouts with a bit of downside protection and then use those payouts to buy into the market as it falls. Risk is missing out on big upswing of course, but at least you can partially take part in it.
I read that article from your weekly newsletter and found it an interesting read. Glad to see you expanding on the topic.
I think this is really dependent on how you define buying the dip and what you do when you buy the dip. There are a lot of ways to buy the dip and feel doubtful the studies captured them all.
Basically it's buying the dip vs opportunity cost
I usually try to tighten my belt a bit and invest more in a down market, and relax a little bit when the market is up.
Well, the explanation at the beginning of the video explains one strategy, but I use auto-invest to DCA without altering that schedule and also buy the dips when prudent.
If buying the dip doesn't work then how about buying the "rip" - if we wait until the market advances 5,10, or 20% how does that work out?
I prefer DCA it’s too hard buying the dips because when you hit your threshold at least I always want to wait for that “better deal “ that never seems to materialize!
What about a percentage based DCA/Buy the dip? Say I invest 80% of what my goal is, and the 20% sits in cash and waits for the occasional market downturn to buy?
Never thought that was what buying the dip meant.
Hi Rob, if your value is only based on the shares you own, wouldn’t buying the dip is always going to be better?
I bought the dip on Friday just because it is fun to buy even if the dip is tiny.
We don't know when a dip will happen of course. We can, however, understand that it is likely sometime in the relatively near future and, based on historical averages estimate a conservative number to pull the trigger at whenever it happens to occur. There are no guarantees, but I see no reason why we cannot put the odds of success in our favor with an estimate of expected value.
It's ironic that you made this video during the dip where the low in October 2022 would have been a great opportunity to earn a significant return in the short term, but I appreciate your long term view.
So if you don’t buy when prices are down when do you buy?
How do feel about VT
What about doing it like “counting cards” in blackjack? Meaning you DCA but when there is a “dip”, you double down or invest larger amounts?
DCA is the art of buying the dip... I agree with several of the other comments, in market such as our current, I go find money to buy this down turn,in increments..
You could always do a Value Investment analysis, sell Put Options on a fair or below fair price, and either keep making money on Puts or get the stock for a good value.
If you dollar cost average in smaller dips or retracement, it's a great strategy for a more sophisticated investor. In the example you gave, buying when it makes a 20%+ dip is too extreme. Bear markets happen on average every 5-6 years. However, for the average investor, it is just best to dollar cost average in periodically wherever the market goes.
I have a question that isn't necessarily related to today's video. I wonder if you have ever used Ally Bank mutual fund Robo account option? I was wondering if you would be so kind as to go to Ally Bank and pretend you are going to invest, $1,000 into a mutual fund Robo account. Then click least risk and click socially responsible. Click on planning to invest it for up to 5 years. Goal is to generate cash. Next you will see the funds that this investment would go to. I wonder what your opinion is of these funds. I am familiar with Vanguard but not the others. What is your opinion of this approach to investing? I am retired. It is a little higher return than their 18 mo. CD rate but less than a percentage point. Thank you so much for your time reading my question. And thank you for all the youtube videos you create and share with us.
the title should be "why WAITING to buy the dip is a terrible investment strategy." if someone is able to invest more than they usually would during a dip, its hard to argue against that being a great idea.
Great video rob! Question though. Do you feel the S&P 500, or stocks in general are all overvalued due to the stimulants packages and QE? I’m struggling to buying more because a lot of so called experts are saying the numbers in the past 2 years are not reflective of their true values. And that the true value might be 20-30% lower from the high in Dec 2021.
There true value will probably be decided by future events and Nobody has no idea what the lows will be.
If your long-term investor I would keep periodically investing in the market every payday
Ummm we are already at that 20-30% low. Today!
How does actively managed account compared to dollar cost averaging?
Happy I knew this intuitively, and I'm just 23!
I think Nick's base premise is incorrect, since he's sort of comparing apples to oranges. He is comparing DCA to buying the dip, which aren't the same. Hoarding cash when the market is low and waiting until it raises to then drop x% which is higher than the starting point, means you will always be buying higher than DCA. So of course DCA is going to outperform buying the dip since you are always investing at a lower price. To me, buying the dip is if you have cash available when market/fund/stock is high and wait for a % dip in the asset to buy. So, your cash was realized when the market was higher from the beginning, not when it was lower. If I'm planning on taxing profit from an asset, the cash is going to be higher than the dip. If I'm selling underperforming stock and to offset cap gains, i'm going to be buying a different asset at a lower price because of the dip. Also, you may consider taking on additional risk and buy on margin on a dip, or put additional cash you had at risk to buy on a dip. On the latter, I accepted risk in reducing my income disruption fund by two months to buy a dip. The opportunity cost for me isn't DCA, but the interest gained from treasuries or high yield savings account versus the adding some risk to purchase on the dip. I also rolled over after tax 401k into roth and traditional IRAs, essentially profit taking from the 401k selling high and purchasing stocks at a discount in the rolled over IRAs because of the market drop.
Could you clarify whether the data is based on DCA with rebalancing or not and then with what portfolio structure.
Rebalancing is at least a mathematical form of “buying the dip” if you do that annually.
Corrections are a good time to pull some profit and reinvest after. If that's buying the dip, I'm in! 😃
So waiting for the dip is the bad strategy and not actually buying the dip?
Bingo. I believe that’s the main point.
The only consideration on whether to buy the dip or not, is if you can do better elsewhere, if you can’t do better, than it doesn’t matter, if the market does as good as avg, or worse, it’s the best you can do
It would be interesting to know where value fits in. When Warren Buffett is asked why he has so much cash, he says it's because he can't find enough good stocks at a price he's willing to pay. It's like he has faith in the American economy, but it's not unconditional. Trust, but verify.
Get money into the market asap. Don’t even wait to DCA if you have a sum available. Just buy and hold the portfolio that meets your needs. Don’t keep cash out of the market unless you have short term spending needs. 👍
Even with inflation as high as it [still is] and the Fed's having to aggressively increase rates for the duration of 2022 to get it down... I think another month or two would be ideal.
I know how you feel; but, I’d still put it in. You never know when the market will go up. Anything can happen. We never know when is the right time to get back in when we try to time the market.
I always have my own dip at home so I don't have to buy the expensive dips at the food places. Or were you talking about the stock market? That would make more sense... 😝
A value averaging strategy can also be considered ,especially during volatile times .
It seems that by sheltering some of the gains after a strong bull run you can value average into or out of the market at a pre determined rate .
If your pre determined rate is 8% and the market delivers an 11% return you will sell enough shares to bring you back down to the pre determined rate of 8% and the following year if the market delivers a return lower than 8% you will take the cash and buy into the market to bring you back up to 8% .
It seems this strategy will force you to buy low and sell high putting your cash to work in place of just sitting idle waiting for the dip.
Potential problems to this though... If you sell above 8% and it just keeps going up then you never get that money back in. Or, if it is a sideways market you sell above 8 and then it retreats to say 4% but never goes down to -8% then all that money is sidelined collecting no dividends etc.
@@jeffsim4191perhaps I did not explain this well.
By value averaging you will guarantee a pre set gain .
In my example the only time you will not need to make a move is when the market hits your pre set number .
Example if your pre set number is 8% and the market is flat you will need to buy back into the market to bring you to your 8%.pre set gain.
But like you mentioned there is the drawback of losing out on gains over the pre set goal but rhis will force you to sell high and build up your cash cushion so you have the funds available to buy low when the market tanks.
What about stocks now, in late Sept 2022? Some are 80% off their highs. Is this a dip or are some just going out of business? I bought Paypal earlier this year after it dropped from $310 to $119, more at $105 and it kept on dropping another $37. It's $87 today so I guess I should have kept on buying on the way down but I don't have a crystal ball. Solid company so I know it will recover. I'm glad I didn't dollar cost average in it when it was in the $200's and higher.
This is a dip and a great time to buy. Once in a decade buying opportunity for good companies. Doesnt mean it wont go lower but in 5 years when we look back at these prices we will wish we could have invested more at this time
I think there is a hybrid strategy here that could prove to be the best of both worlds.
How about Roth converting the dip?
But would you agree that if you are not already in the market and are 70 years old sitting on a wad of cash that you should indeed wait for a major dip before buying into the market??
Yes, but I wouldn’t wait too long. There are stocks with 5-7 p/e with 4-8% dividends that I would start buying now. VZ, WBA, HPE, TPR, CMCSA. I’ll be happy to keep buying them if they drop even lower. I plan to spend $2,000 on each & I’ve only spent about $500 so far. But it’s a struggle not to buy more every day I see them red.
I guess I misunderstood "buy the dip" for quite some time now. No matter what I continue adding to my investments, I just add a little bit more specifically into whatever it is that I'm looking to grow my position in whenever it dips. I don't just leave my investment money out of the market until it dips, that's "timing the market" in my opinion not "buying the dip".
No, you didn't misunderstand anything, this video is mistitled. It should have been titled "Why waiting for the dip is a terrible investment strategy".
I'd like to know if buying the dip works in combination with "selling the peak." Sitting and waiting with cash that could be earning dividends seems like a losing game, especially if you have to wait years to put it to work. But if it is combined with selling at the peak, it becomes market timing. I don't know of many market timing schemes that actually outperform the market though. Meb Faber claims that using a 200 day moving average can slightly outperform the market, but not all the time. He nevertheless splits his investment strategy between buy and hold and market timing. It would be nice if someone could evaluation the "perfect knowledge" scenario of selling the peak and buying the dip because that is realistically what people are trying to do when performing market timing.
Interesting point.
What if you invest more money in bear markets? As in put more money than usual.
It's really the same issue. Where did you get the extra money? If you had it all long, why not invest it when you can?
Just means either you should have been putting in more all along or you’re cutting into cash reserves/emergency fund (ie increasing personal risk).
Now if you invest more by earning more or spending less and therefore increasing the percentage of income you are investing, that’s fine. But once again… should you just have been doing that all along?
@@jasonhobbs2405 Another option is coming into new money during a dip. We downsized to a condo last month because we are empty nesters now and the difference between selling our home and buying the condo was close to 400K, and fortunately the markets are down now so we decided to split that amount into two monthly investments. I suppose in the long run it means nothing, but it feels like a bargain
@@rob_berger Well.... If you have the extra money in a different vehicle (high interest savings etc) and see P/E ratios improving as the market sinks then, if you believe in the value factor, at some point the excess expected returns can make it attractive enough to increase the percent of one's equity position. If this isn't true, then why would one choose to tilt towards value? They should just continuously put money in regardless of the valuation.
I wonder how likely a dip would be given rising interest rates and an historically high Schiller P/E ratio.
👍🙏
What if there is, say, 3 things you invest in. Each month/week, you pick one. Would buying the dip on one of those work out?
Yes, don't buy when it's lower, buy at all time highs instead.
Buying the dip is a fantastic investment strategy, waiting for the dip, which is what this video should have been titled, is not a good investment strategy.
You can buy the dip incrementally by withdrawing small portion from your emergency fund and then replenishing it when the market recovers.
If an actual emergency occurs during the dip(Scenario 1) and your remaining emergency fund is not enough(Scenario 2). The prob of both these scenarios happening within a short period of dip is very low. But if it happens you can take back your money from the mutual fund at a little loss or take a loan. That's the risk you are taking but it is very low.
Also you invest incrementally in the dip to track the dip. If month 1 there is a 5% dip invest 5% extra. If month 2 there is another 10% dip from month 1 then invest 10% more than month 1
I think withdrawing from an emergency fund like this is an insane strategy. In particular, the idea of taking out debt on top of robbing the funds. It's an "emergency" fund not a "buy dips" fund. I find it useful to think of the emergency fund as insurance. To each their own though.
Don't think "buy the dip" to anyone means holding cash for 5 years waiting for a certain percentage fall. It's more likely some variation of what to do with short-term or new cash or switching out of underperforming assets and considering buying back in timing.
This
Sounds like it's just a variation of 'timing the market/stock/index/fund'. Plus, as you pointed out, there's the opportunity cost of leaving stranded cash on the sidelines doing nothing. Probably a baked in version that may work is buying into value 'stocks/funds'. They are already companies that are in the 'dip'...
I buy every 1st, 8th, 15th and 21st, regardless of what is happening. Thanks for this excellent video.
I am 66 now and I switched my Roth account from Morgan Stanley to Vanguard be ause of cost and poor advisor track record. I am my own boss now on vanguard and the advisors I had on vanguard put me into poor funds again. My question is can I send you a snap shot of my fund and maybe you could give me some advice on the funds to buy that have the best chance of increasing in value over the next five or ten years before I have to maybe draw some cash out? Also what are the official dates that I can add the $ 7000. Limit to my Roth every year? I was told it is April 15th to April 15th every year, is that correct??
Roth contributions go by the calendar year
January 1 to January 1 ??
@@davefalls6703 yes sir
@@davefalls6703 But you have until April 15, 2023 to contribute your 2022 limit. So you could technically contribute $12,000 on January 1, 2023 if you didn’t contribute anything in 2022.
@@JC-li8kk , the odd thing about it is that I called vanguard and they said I couldn't contribute until January 2023. Even the Vanguard platform is showing that I am maxed out. I will try to call them again to straighten this out. I'm missing out on some good buying opportunities.
Rob thank you so much for this video. I truly can't thank you enough for this. I have been beating myself up over and over again for several months now because I put a bunch of money into the market around the beginning of this year. Basically the worst possible time I could have done that. This video makes me feel a little better because I just did exactly what you say you always do when you have money to invest, so again this makes me feel better and I guess I don't need to be so hard on myself and I should stop beating myself up. Thanks again Rob
You're not alone. I did the same thing.
Lump sum investing is mathematically the better way to do it. Especially with tax advantaged accounts. Taking say, 100k, and taking a year or two to invest it by DCA will 4/5 times result in a worse performance. The reason is, three market is usually a bull more than a bear. So DCA makes one purchase at higher prices. To off set thatva little, value invest 😎 that worked in any market
@@mr.financial That only works IF you have a lump sum at day 1. So, saving up a "lump sum" to "buy the dip" like Rob is talking about is not better than DCA over the period someone is saving.
@@hulenbryant5637 I think that is part of a misconception in the investing community. That's lump sum investing. When you dump all your available investment cash into the market at once, even if it is a small dollar amount.
@@hulenbryant5637 not at all. Even most financial advisors will slowly deploy cash into the market. A set amount per quarter. That is a very traditional way of doing things.
Very relevant. But in reality isn’t DCA is a kind of buying the dip ? The real alternative would be to invest the total amount in one go?
No.
When you DCA you are buying at a pre determined dollar amoint regardless of the market conditions .
And by buying the dip you are out of the market creating an opportunity cost while you wait for equity's to go on sale.
Rob, You noted that there's an better argument for buying the dips on on international investments (vxus, vwo) as opposed to domestic funds. Is there any data on buying the dip for other classes of investments such as commodities (i.e., dbc) or gold (gld) or reits or bonds.
Good info! What if you bought the dips, and sold the climax? In a taxable vs non taxable?
Not that anyone could do it!
The Best Time to Buy is Now. No need to wait for another dip that may or may not happen. The market can bounce up anytime.
Buying the dip is simply not a strategy, its just a thing everyone wise does. the most important thing is increasing your portfolio cap all the time the price seems fair for a long term business. buying only the dip or quitting will cost you money in the mean time because you losing great profit benefits when stocks are in their middle ground. you also have to take notice that as times goes on, you can always do capital allocation from whos at 3x 4x in the long for a great opportunity in a dip. it comes with time. having a only buy the dip mentality is a short term strategy that in the long term will cost tons just because youre trying to dump all your money on a -20% reduction but wise investors take cash an put it in 0 to -20% situations and still make money. even a 1 or 2% abver fair price is still a good investment if you look at it in a long term view, especially equities which you can trade later for a better stock investment.
Buy below fair value. End of.
As a new investor, I didn't exactly know what buying the dip meant in concrete terms. Sure, buy when the price goes down. But there are many ways to do that. And, simply thinking it through without any data, it is clear that one can come up with multiple scenarios which you highlighted in this video when "buying the dip" is actually paying a premium. And so, I always thought, "surely!", that cannot be what people mean when they say, "buy the dip". Sometimes it could work. And sometimes not. And it is an empirical question as to when it works and when it doesn't. Leaving yourself vulnerable to those kinds of contingencies is not a strategy at all in my opinion. The only strategy I can think of that makes sense out of "buying the dip" is to ONLY buy the dip if it reduces your cost basis using the funds from your future scheduled DCA investments. Otherwise, continue your regularly scheduled DCA regime. But when a dip does occur, the amount that you take from your future DCA investment is determined by the percent of reduction to your cost basis. And maybe you make a rule that the dip must be a certain minimum percentage below your current cost basis, say 5% or 10%. And as the percentage increase, you pull more and more funds from your future scheduled DCA investments until you max out, e.g., you reach your $6,500 limit in your ROTH.
I just opened up my first ROTH account at age 41. I haven't taken any positions yet - it is that fresh. Does the above strategy make sense to you as a viable "buy the dip" strategy? Again, I am simply thinking it through. I am not a math and numbers guy. Thanks.
Good points. My husb and I have been investing for many yrs and educating ourselves with good books and now a few video sources. We are Cdn. For us we have a watch list incl certain price and a funds/stocks we want to add to on a ‘sale.’
I bought the dip, and the dip kept dipping.
Rob, can you comment on a similar strategy that is geared towards those in retirement? E.G., I have a 50-50 stock/bond mix. I'm waiting for a 40% market dip to rebalance to 65/35; favoring stocks. I'm not planing to invest ANY sidelined money as all my funds are working for me already in the market. Also, I know that periodic rebalancing already does this in a less radical way. Any thoughts about that kind of approach for leveraging the low point with this kind of rebalancing tweak? Would love to hear your thoughts.
I think that a great idea, as long as increasing your asset allocation that much, and understanding the market can still decline even more.
Invest long term. Rebalance as necessary. Max out retirement accounts if able.
Stay the course yall. Consistently invest in great ETFs with low fees! I know it’s tough but keep up the good work friends 👊
That’s why you dollar cost average in.
I buy a stock when it becomes undervalued. Doesn’t matter to me if it’s today or 5 years from now. If it drops 30% in 1 day or takes 3 months, when it hits my “undervalued price” that is when it gets bought. Every stock has a price I’m willing to pay. There’s no such thing as me just wanting to own a name for the sake of owning that name. Has to be undervalued. The day it becomes overvalued I sell.
I just set buy prices at certain levels going up or down and let it trigger 😊, so far working out well with jepi and jepq.
I’m guilty of this too.
Yes, this is more of a "feel-good" statement. Yikes, the market is down, but at least I'm buying the dip. The best you can do is save and invest more when we're in a dip. But it's not going to make a big difference when you already have a huge amount invested. How much money can an average person come up with in a moment's notice, to buy the apparent dip? I can save and invest an extra $500 a month by delaying non-vital purchases, stop eating out, or start investing the emergency cash.
You have to raise cash when we are overvalued. A lot of ppl get too attached to their stocks so they never want to sell the whole thing (me included). Very dangerous to do that. Apple has a p/e of 24. No one should own anything that expensive in this environment. But how many ppl do you think are holding Apple?
I do agree with a young people who have 40-50 yearsmto invest. Even tnose whonhave 20 years to invest. Hovever, if you are already in your retirement. And ALL macroeconomic data is clearly showing that the severe recession or even worse is imminent, I would ventire to argue that taking your chips off the table and putting them in safe cash is way less costly than waiting like a deer on the road waiting for the car to hit you.
FOMO is a difficult emotion to overcome. Looking at ling term MACD trend of market or sky-high Buffett indicator and waiting inncash is incredibly difficult. 20% down is not a problem, but lets also remember that markets dropped 80% or more over period of 2-3 years. Stock markets may drop only 40% innfirst year, bit follow with another 1- 2 years equally bad 2020 was bad but very short as FED pumpedmtrillions of dollars in QE and goverment added even more of "free" money, froze evictions. Now, these options are out off the window, and will NOT happen. People will be losing jobs and houses the way they were in 2008. Layoffs, loan defaults, high inflation, defaults on electrical bill by 20 mln of Americans .... this is the train coming our way and staying on tracks is a very bad idea. What do you thing an 80% shave from a retiree at 65 with 500k do, or even 1-2 million, When inflation is raging at 12-15%? Maybe, it is better to step off the tracks, let the train pass, and then rejoin the journey. Parking money at 4% for a year or two is better then getting hit with 80%+ "correction" IMHO. And let's remember - it is very unlikely men would be jumping off the buildings after losing 20 or even 40% the way many during 1929 crush, would they?
Unfortunately, it's not 2008. Today isn't the same. Different conditions always create different outcomes.😃
@@eb1888. exactly. It's going to be worse.
@@MrNoBSgiven We'll look back on this prediction when we're in the future. I'm not feeling the uncertainty today I felt in 2008.
When there is flat for the years Buy the Dips works fine
Thank you so much for this video! I was feeling bad all this year since I bought a bunch of Google/Alphabet and Apple stocks earlier this year, but this video helped make me feel better-since I know in the long run, those investments will pay off anyway, irregardless of the losses I have taken this year. And I came up with one good example for "don't buy the dip": let's say you identified a great stock at $10, and you thought to yourself, "OK, I'll wait until it drops 30% or more and buy it at the bottom." Let's say you were patient and waited 5 more years when it dropped _50%_ to buy it-but you'll still be an idiot then. Why? Bc the stock is already at $50 at that point (even with the drop)! It simply went from $100 to $50. So if you had just bought it when you first identified it at $10, even with the 50% drop later, if you had just held on, you would still have made 5X your money back.
TLDR; when you identified at good company and you think it's at a fair price, just buy it and hold on, and don't pay any attention to what anyone else thinks.
I'll buy more when the S&P 500 is below 3300.