Drip feeding is generally ok, however when equities are in an awful bubble then this approach is not wise. Our bubble in asset prices is terrible. The downside risks are huge. My only advice to those buying continuously is search for companies which aren't in an absurd bubble. Draw downs can take 10 to 20 years to recover.
I am sorry, but your video is off Dip is defined as being down 4-9,9% from 52-week high Correction is being down 10-14,9% from 52-week high Crash is sudden sharp decline when the market drops by 15% and more in few days Bear market is 20%+ decline from 52-week high Your video is not comparing buy the dip vs DCA Your video is describing buy the start of the Bear market vs DCA
Thank you very much! This video came very timely for me. As the market looks like it’s crashing I was in a dilemma of whether I should continue dollar-averaging them down or wait or “sell now and get back in when it’s lower”. Your analysis helped me to make an informed decision.
Buying when it’s lower is always tempting…but more important is to have a conviction on the value. So long as it matches your expectations what does it matter if price is falling or rising. And if you don’t have such inkling or cannot stick to it then it is not investing, but speculation.
BTFD should always work in a long term rising market? Still don't understand why if you had bought the SPX index at the bottom of every significant dip since March 2009, why you would be worse off than buying half the time at the top of the market cycle and the other half at the bottom of the cycle???
"Time in the market beats timing the market." You are expected to have a cash buffer in any case. Cash buffer and regular income allows to have a mixture of "drip feed" and "buy the dip" strategies instead of the non-realistic extreme strategies.
When you buy the dip you aren't timing the market, you are making the most out of time in the market, the same person that said "Time in the market beats timing the market." which is Warren Buffett also said "Be Fearful When Others Are Greedy and Greedy When Others Are Fearful". The first quote translates to "do dollar cost averaging" and the second translates to "buy the dip" which ties nicely into the first one because it means your cost average is lower, which is pretty much the whole point of investing.
This is a well established statistical view. However, being aware of individual market evaluations surely plays a part - if we're confident that the market is currently overheated, and likely to react badly to upcoming fiscal policy changes then buying it at this precise moment cannot be recommended. It's notable that Warren Buffet has been accumulating a 'war chest' over the last few months. It's not his strategy to "buy the dip", but nor is it to invest regardless of market conditions.
How can you possibly know that the market is overheated? You notice Warren Buffet's 'war chest' but even he himself does not predict what the market as a whole will do. You either analyze individual stocks or don't analyze at all. If Warren Buffet can't analyze the market as a whole, then you probably shouldn't either. Cheers.
@@kevingeorge920 Note that I said "IF...". You can look at things like the Shiller PE ratio, which certainly points that way. You are of course right that (as the famous phrase goes) "the market can stay irrational longer than you can stay solvent" - you can't time the market. On the other hand, we know we're due for a bunch of announcements this week which are likely to fuel volatility, and the overall gravity appears to be downwards. Personally, I'm happy to delay investments in that environment for a short while to see which individual stocks become more attractive as a result.
@@LockFarm I agree with Andy. On most other occasions dollar cost averaging would be ideal, but at this current market I think it's good to hold out for few more weeks if not months.
I love how open minded you are on investing, I found an article of investors investing in growth stocks that made up to $500,000 within 2months from shorting, so please I'd really love more tips and clues on how to outperform the market and make such profit using options.
True, shorting isn't for rookies but that doesn't mean they have to stay off it, I started as a rookie and in my first 5 months, I made a profit of about $380,000 with no funny strategies, I basically was just following the steps and guideline of my mentor/consultant, so as long as you've professional help, you're good to go.
Thanks for this interesting content with wonderful examples! May I please inquire: don't you believe that currently (Jan-22) the peak is very close if not there yet? If you had zero investment as of today, would you still do the 'dripfeeding' right now or give it a bit of time to normalize (ie get down) and then get in with a lump sum that is followed by the drip feeding installments? Thanks in advance for your time.
I do both. Constant monthly drip feed and then keep a wad of cash back to buy bigger investments when the market drops. Keeping a close eye on things at the moment although I think equity generally has a lot further to fall.
Surely the best way is to keep buying any small dips in a long term rising market, when those dips end and the market turns up again. Then stop buying and sell some/all when the market starts going through a big sustained sell off like Feb 2020. Surely it doesn't make sense to keep drip feeding money in when markets are going through 3-4+ year bear markets. Better to wait until the bull market returns?
It feels like there should be something along the lines of drip feed, however, if the fund/index etc is below X then drip feed more.. Perhaps something along the lines of 5% below = 20% more drip, 10% below, 40% more drip! - Obviously the percentages will vary depending on the investment in question and your attitudes to risk. Very different if it's something like a Global Index or SMT!
@@davisutton1 indeed a modification, trying to find the middle ground really. It feels like an approach which might work well if there was some robust logic behind the percentages.
Time in the market beats timing the market...almost always. Stocks rise far more often than not. Stocks are volatile, but mas often than not, theyre positively volatile! That is basically the deal here and know that one. You get more power of compounding w the steady drip and if a s&p fund, you get more reinvested dividends, right?. Shld touch on the dividend impact here. Hoarding probably means less in paid out or reinvestited divs. And as u said...over time ..longer periods..the market is bouncing up n down...in an overall upward direction! Of course you dont want to overpay and buying low is recommended over buying high for sure but you have to wait too much w $ on sidelines and trying to figure out timing is a futile endeavor. No one knows the nxt direction of the market over any time period for sure.. The time factor is very important, as well as low costs, diversification, your asset allocation%s, and not wasting money! And making money is important. Lol etc.
A very interesting video if indeed one has the ability to drip feed one's investments. But what if you already hold substantial investments (pre-retirement) and do not plan invest more?
Hi @Superhans then the best strategy is simply not to sell if markets fall. If you don't have any new money to invest there's not much you can do and leverage is not a great idea. Thanks, Ramin.
And that dip maybe huge still even on the eventuality on AAPL... the dip currently creating is likely $100 to $140ish... then a last herah up testing $180 MAYBE... then the eventual dumpster dive for the market $30 to $50 a share. And then who knows... perhaps another better company comes out and AAPL looks like former RIM or current BB as Iphones and Apple in general is so 2010, just Blackberries are so 2000's.
Very interesting. While you comparison clearly shows that buy the dip underperforms dollar cost averaging, the key thing (that you mentioned) is that it has a higher sortino ratio. I'm portfolio theory we learn that that is the most important thing. Then you can use leverage to up your return (or risk) to the desired rate. I have been using buy the dip at 20% but using triple leveraged ETF. Also instead of leaving the money invested, I remove it when it reaches past highs. Would be good for you to backtrst that strategy or variations of it
Thanks for the forecast! 📊 I’ve got a question: 🤨 I only have these words 🤔. (behave today finger ski upon boy assault summer exhaust beauty stereo over). Not sure how to use them, would appreciate help. 🙏
I really like the concepts in this video, and appreciate the amount of research you've done. But one question, is it realistic to assume people are going to accrue cash for twenty years before investing? No, it's not realistic. Dips are good points or opportunities to enter or increase. I don't think its either/or.
His point and a lot of other research shows that for the vast majority of people without an edge, like having insider information or being a top performing professional investor, dollar cost averaging strategy beats trying to time the market.
Best return... Pile up cash and invest after market meltdown, hold 7-10 years then sell... Wait for next market meltdown. Rinse and repeat. Easier said than done though.
Drip feeding is easier for index, you have your monthly budget and you stick to it. For single stock though, if you are into it, you can decide that you only take let's say 1/4 or 1/3 of a position and then only buy more if the price drops a certain %, if it never does you stick to that lower sizing position for that given stock. Of course, if the reason for the drop in price would be idiosyncratic and make you reconsider the quality of that stock you do not double down... only if the drop is related to overall market volatility and you are not concerned particularly for that company
Apple, Tesla, Microsoft all have earnings next week. When those companies beat Wall St estimates, the whole NASDAQ and SP500 will shoot up. Then it will correct. Ad infinitum. And equally, this the best time to buy Large cap growth because the next rotation later this year into Tech will see your gains exceed what they were before. Buy low, sell high. Be greedy when others are fearful.
Yes bit you've forgotten the cost/transaction cost of buying continuously (i.e. drip feed incurs more spread costs, FX costs, and other transaction costs no? Please try to model this and see whether your hypothesis still works.
Interest in a hybrid scenario. It feels like the "buy the dip" scenario is very sensitive to the % drawdown. What if you do 75% of your monthly income into drip feed, but continually hold back that 25% until a x% drawdown?
Just keep buying as you've been doing, be consistent every month. Nobody knows exactly the bottom, don't mess with it, consistency is key. Just my opinion. The average person doesn't know the charts.
Agree 100%. don’t know where the term drip comes from since this has been known as dollar cost averaging for the 40 years that I’ve been investing. That’s the reason why professional money managers can’t come close to beating the average person who just participates in a 401(k) and has the same amount taken out of each paycheck put into an index fund. You’re automatically buying less shares at highs and automatically buying more shares at lows. I am firmly convinced that technical analysis is just nonsense and completely unnecessary for 99% of investors. And if people would think INVEST, not trade, they could wisely just ignore the charts
No, buying the dip is terrible for stocks if you are buying a falling stock averaging down is bad. Averaging down an index will work long term because the index will remove bad stocks and better ones will be added. I would rather myself, instead of monthly drip feeding, just buy the market whenever there is a down day. That has to be better than buying at random monthly at possibly a monthly market peak!
Supply and demand are causing price changes. Real dips happens rarely and often the participation is named speculation. You'll be lucky to have 1-2 dips lifetime in the sectors you understand and you'll be even more lucky to have liquidity when this happens. The economy is working the following way - once demand is higher than the supply in the next 20-30 years we have overproduction
I think you mean when supply is higher than demand we'll have overproduction right? At the moment demand is definitely higher than supply. Used cars are a prime example of this because of the chip shortages for newer built cars. Cathy Wood speculates that inflation will be transitory once we're able to get supply chains moving normally again. Of course that's a big "If"
In the comments some people are talking about a hybrid strategy - drip feed as well as invest in dips. Well, given the recommendation in the video, isn't that extra money you will be putting in during the dip would have as well performed better if you had invested in drip feed?
I thought it would make sense to just drip feed money in consistently every week or month for years while also having some money in reserve to buy the dips when they come. If you do that for 30 years perhaps you'd get the best of both worlds
I second that and assume it would outperform on average (i.e., progessively pull from your emergency fund as the market drops, but have everything else invested.)
He is picking up 100 year period recent 20 years everything changed. Everything depends how feds act. Japan started it in 1980 USA 2008. So forget these nice charts. Try to do research online and listen what famous investors say not this.
well, given the recommendation in the video, isn't that extra money you will be putting in during the dip would have as well performed better if you had invested in a drip feed?
@@v-4-vendetta Yes. But if you happen to have extra money you haven't invest, you should buy the dip. Or pull out of an emergency fund or other "safe" assets.
60% and even 20% dip examples are pretty extreme so makes sense why this extreme does not work. What about a mixture of the two? What if you consider your "dip" more like (for example) 3-4%? By nature, these level of dips are far more frequent and if you buy in at each of these smaller dips, you end up with a combination of (1) buying dips (dip) and (2) a more frequent steady purchase into the market (drip).
I was reading that in the 1930s dividend income became a much greater proportion of total returns, so if people were not in the market they would have missed out on the dividend income and it took years longer for their investments to recover.
This is more true for index investing. But buying the dip works for individual stocks. I'll have stocks that dip down while others run up. For example, I sold a portion of my xom recently, bought some baba, cost, and Microsoft with that. Will buy more stocks as the market keeps dropping
So the question is, what performs better in case of long-term trend of declining equity market, such as in Brazil since 2008? Will buy-the-dip approach perform worse here too?
Well, you time the market, buy the dip sell the rip for individual stock, not an index fund as the dip in individual stock is significant makes it worthy in term of Risk/Reward. In your example you are using an S&P 500 an index fund not an individual stock. Also, you buy the dip very selectively, only for high conviction stock with good fundamental, and good sign they will recover, not blindly buy the dip every single stock just because they fall significantly. After you make your conviction, you are still using technical analysis (charting) to gauge the best entry point. Reasonable number of acute retailer traders beat the market using that method. Certainly, majority of people can not do that as it will need both fundamental and technical skills (reading the chart). Traders are even using leverage to optimise the price movement. It is very easy to see when you see a good stock in S&P 500 drop significanrly not because of fundamental change, you identify the bottom and buy the dip in a smaller chunk, not in one go. When you miss the boottom and it fall further down, you do DCA while moving down. Mega caps stock in S&P 500 will always go back to ATH.
Didn’t understand the use of the Brazilian index when you have the ftse available much closer to your home accent which hasn’t really had a high since 2008 or was it 2001??
How much would you pay as commissions to your brokers for that dripping? The cheapest as I know in UK is iWeb share dealing service which is still £5 per trading action.
I have been doing that to scale in. I buy 100% at the bottom and sell 50% on the pops. It helps me to accumulate shares while preventing catastrophic losses.
I would rather myself, instead of monthly drip feeding, just buy the market whenever there is a down day. That has to be better than buying at random monthly at possibly a monthly market peak!
How would the same scenario look if you were to buy value stocks in your "build cash position" periods and switch to growth stocks in your "buy the dip" periods?
I was thinking something similar. Rather than look at market value as "the dip", look at price to earnings/value and when that drops by the percentage brackets, see how that works out. I think we'd still see drip feed come out on top, but I suspect the alternative strategy would be much closer and have more data points above the reference.
Unconvinced. You would never just build up cash, you'd have it on deposit or even in bonds and switch to equities on the dips. This would transform the figures presented here....
Why would you not consider selling when your stock is high 50%/100%? Why would you wait for 30 years? Would you consider making a video on opposing scenario? When to sell?
Those who didn't buy the dip yesterday missed it. The key is to buy equities from financially sound companies (relatively low debt) with good earnings and valuation. Stocks that are profitable enough to pay dividends are a good choice.
@@Pensioncraft Ok, so you have proven that buying the dip doesnt work over a long period of time. But then why do I get that feeling every time my favorite stock dips that if only i would have kept the capital for later, like today, I could have bought 1.2 or 1.3 or 1.5X more shares of the same stock that i love anyway?!
Ramin, have you analysed a combination of the two? Monthly drip feeding AND deploying capital if markets correct (fall greater than -10%). Thoughts on that approach?
well, given the recommendation in the video, isn't that extra money you will be putting in during the dip would have as well performed better if you had invested in a drip feed?
While this video makes some good points it overlooks the fact that most dips that are being bought today are as little as half a percent. What they actually mean is buy and buy and buy and buy. And their trading experience, well about April 20209
Surely lump sum investing outperforms DCA? I'm certain you did a video about it. Anyway, I'm currently DCA into my S&S ISA, however I have a pretty sizeable cash balance to invest should the market decline by 20-50%. My strategy being buying at pre-determined levels 20%, 25%, 30%...... 50%. That way I'm just sizing up my DCA and having the opportunity to buy at lower prices. As you said, the market generally trends up, so after 20 years all those positions should be very much in the green. Just my thoughts.
What if you do both? For example, someone drips every month and the months that the market is below the 1 year high then double the drip that month? Would this be the best of both worlds?
well, given the recommendation in the video, isn't that extra money you will be putting in during the dip would have as well performed better if you had invested in a drip feed?
@@v-4-vendetta , no the difference is not an indication of relative gains it's more about how those gains are being acquired over time and how you can psychologically tolerate the differences of the two strategies.
Buy the dip way beats the market the past few years since there has been so much volatility. Some things have dipped and rebounded seven percent five times over the past year alone
Decided things are a little too volatile at the moment, am now investing the same amount weekly rather than monthly. Seems like the best way to have both. Would be interested in seeing a historical comparison of drip feed frequency & performance.
Holding treasuries rather than cash might make this look significantly better, no. Some appreciation during the holding period, and especially highly valued during an equity crash. I would love to see a comparison.
If you like my videos then why not check out my weekly podcast “Many Happy Returns” many-happy-returns.captivate.fm/
Drip feeding is generally ok, however when equities are in an awful bubble then this approach is not wise. Our bubble in asset prices is terrible. The downside risks are huge. My only advice to those buying continuously is search for companies which aren't in an absurd bubble. Draw downs can take 10 to 20 years to recover.
Nobody buys the dip 1 year after it happens at whatever price it may be, they buy the dip when the dip actually happens
I am sorry, but your video is off
Dip is defined as being down 4-9,9% from 52-week high
Correction is being down 10-14,9% from 52-week high
Crash is sudden sharp decline when the market drops by 15% and more in few days
Bear market is 20%+ decline from 52-week high
Your video is not comparing buy the dip vs DCA
Your video is describing buy the start of the Bear market vs DCA
Depends very much on what stocks you are buying as well
Thank you very much! This video came very timely for me. As the market looks like it’s crashing I was in a dilemma of whether I should continue dollar-averaging them down or wait or “sell now and get back in when it’s lower”. Your analysis helped me to make an informed decision.
These are exactly the same thinking I had.
Buying when it’s lower is always tempting…but more important is to have a conviction on the value. So long as it matches your expectations what does it matter if price is falling or rising. And if you don’t have such inkling or cannot stick to it then it is not investing, but speculation.
Would be interesting to also compare a valuation based strategy!
The question is what is the return on your cash while you are waiting to invest? How much of a difference does that make to the results?
Straight to the point. Simply explained. Fantastic content as always Ramin!
BTFD should always work in a long term rising market? Still don't understand why if you had bought the SPX index at the bottom of every significant dip since March 2009, why you would be worse off than buying half the time at the top of the market cycle and the other half at the bottom of the cycle???
"Time in the market beats timing the market."
You are expected to have a cash buffer in any case. Cash buffer and regular income allows to have a mixture of "drip feed" and "buy the dip" strategies instead of the non-realistic extreme strategies.
When you buy the dip you aren't timing the market, you are making the most out of time in the market, the same person that said "Time in the market beats timing the market." which is Warren Buffett also said "Be Fearful When Others Are Greedy and Greedy When Others Are Fearful". The first quote translates to "do dollar cost averaging" and the second translates to "buy the dip" which ties nicely into the first one because it means your cost average is lower, which is pretty much the whole point of investing.
@@thefirehawk1495 Exactly, you can increase your regular buys (or reduce the interval) when the market is down.
If you buy the dip you also need to sell the peak. Something like sell x% at monthly highs and buy x% at monthly lows.
This is a well established statistical view. However, being aware of individual market evaluations surely plays a part - if we're confident that the market is currently overheated, and likely to react badly to upcoming fiscal policy changes then buying it at this precise moment cannot be recommended.
It's notable that Warren Buffet has been accumulating a 'war chest' over the last few months. It's not his strategy to "buy the dip", but nor is it to invest regardless of market conditions.
How can you possibly know that the market is overheated?
You notice Warren Buffet's 'war chest' but even he himself does not predict what the market as a whole will do. You either analyze individual stocks or don't analyze at all.
If Warren Buffet can't analyze the market as a whole, then you probably shouldn't either. Cheers.
@@kevingeorge920 Note that I said "IF...". You can look at things like the Shiller PE ratio, which certainly points that way. You are of course right that (as the famous phrase goes) "the market can stay irrational longer than you can stay solvent" - you can't time the market. On the other hand, we know we're due for a bunch of announcements this week which are likely to fuel volatility, and the overall gravity appears to be downwards. Personally, I'm happy to delay investments in that environment for a short while to see which individual stocks become more attractive as a result.
@@LockFarm I agree with Andy. On most other occasions dollar cost averaging would be ideal, but at this current market I think it's good to hold out for few more weeks if not months.
I think people would be more interested in increments between 1-10% dips, not these monumental price collapses provided.
That's a good idea, market corrections of 10% happen every few years so would be an interesting comparison.
Great video and well explained. Nice to have the reassurance of my own drip feed strategy. Thank you.
I love how open minded you are on investing, I found an article of investors investing in growth stocks that made up to $500,000 within 2months from shorting, so please I'd really love more tips and clues on how to outperform the market and make such profit using options.
you need a good level of skillset for shorting
shorting isn't for rookies
True, shorting isn't for rookies but that doesn't mean they have to stay off it, I started as a rookie and in my first 5 months, I made a profit of about $380,000 with no funny strategies, I basically was just following the steps and guideline of my mentor/consultant, so as long as you've professional help, you're good to go.
@@martinking3839
if its not too much trouble how do you reckon i get in touch with your consultant?
@@benjaminlee876 just google the name Lisa Jill Grenell and you should get all the info you need.
Excellent analysis based on actual market returns. Well stated and easy to understand. Well done !
Much appreciated!
What if we do both? Buy the dip and also regularly average in.
Thanks for this interesting content with wonderful examples! May I please inquire: don't you believe that currently (Jan-22) the peak is very close if not there yet? If you had zero investment as of today, would you still do the 'dripfeeding' right now or give it a bit of time to normalize (ie get down) and then get in with a lump sum that is followed by the drip feeding installments? Thanks in advance for your time.
Best and most relevant video out there for these uncertain times
I do both. Constant monthly drip feed and then keep a wad of cash back to buy bigger investments when the market drops. Keeping a close eye on things at the moment although I think equity generally has a lot further to fall.
I think im just gonna buy some skis instead
Why further to fall? Because a chart looks too steep?
Money supply.... there's no going back now.
Surely the best way is to keep buying any small dips in a long term rising market, when those dips end and the market turns up again. Then stop buying and sell some/all when the market starts going through a big sustained sell off like Feb 2020. Surely it doesn't make sense to keep drip feeding money in when markets are going through 3-4+ year bear markets. Better to wait until the bull market returns?
It feels like there should be something along the lines of drip feed, however, if the fund/index etc is below X then drip feed more.. Perhaps something along the lines of 5% below = 20% more drip, 10% below, 40% more drip! - Obviously the percentages will vary depending on the investment in question and your attitudes to risk. Very different if it's something like a Global Index or SMT!
That's really just a modification of dollar cost averaging, but a worthwhile modification.
@@davisutton1 indeed a modification, trying to find the middle ground really. It feels like an approach which might work well if there was some robust logic behind the percentages.
It’s not timing the market…it’s time in the market that counts.
Time in the market beats timing the market...almost always. Stocks rise far more often than not. Stocks are volatile, but mas often than not, theyre positively volatile! That is basically the deal here and know that one. You get more power of compounding w the steady drip and if a s&p fund, you get more reinvested dividends, right?. Shld touch on the dividend impact here. Hoarding probably means less in paid out or reinvestited divs. And as u said...over time ..longer periods..the market is bouncing up n down...in an overall upward direction! Of course you dont want to overpay and buying low is recommended over buying high for sure but you have to wait too much w $ on sidelines and trying to figure out timing is a futile endeavor. No one knows the nxt direction of the market over any time period for sure.. The time factor is very important, as well as low costs, diversification, your asset allocation%s, and not wasting money! And making money is important. Lol etc.
I kept buying in chunks because of the fees my bank charges.
Thank you for video ! Love ❤️ . Have a great day
Thank you! You too!
A very interesting video if indeed one has the ability to drip feed one's investments. But what if you already hold substantial investments (pre-retirement) and do not plan invest more?
Hi @Superhans then the best strategy is simply not to sell if markets fall. If you don't have any new money to invest there's not much you can do and leverage is not a great idea. Thanks, Ramin.
Buying the dip may not work for Peloton but it may work for Apple stock.
And that dip maybe huge still even on the eventuality on AAPL... the dip currently creating is likely $100 to $140ish... then a last herah up testing $180 MAYBE... then the eventual dumpster dive for the market $30 to $50 a share.
And then who knows... perhaps another better company comes out and AAPL looks like former RIM or current BB as Iphones and Apple in general is so 2010, just Blackberries are so 2000's.
Very interesting. While you comparison clearly shows that buy the dip underperforms dollar cost averaging, the key thing (that you mentioned) is that it has a higher sortino ratio. I'm portfolio theory we learn that that is the most important thing. Then you can use leverage to up your return (or risk) to the desired rate. I have been using buy the dip at 20% but using triple leveraged ETF. Also instead of leaving the money invested, I remove it when it reaches past highs. Would be good for you to backtrst that strategy or variations of it
Given that stocks outperform bonds over the long term and you say buy stocks regularly at any price, why do you hold any bonds?
Thanks for the forecast! 📊 I’ve got a question: 🤨 I only have these words 🤔. (behave today finger ski upon boy assault summer exhaust beauty stereo over). Not sure how to use them, would appreciate help. 🙏
I really like the concepts in this video, and appreciate the amount of research you've done. But one question, is it realistic to assume people are going to accrue cash for twenty years before investing? No, it's not realistic. Dips are good points or opportunities to enter or increase. I don't think its either/or.
His point and a lot of other research shows that for the vast majority of people without an edge, like having insider information or being a top performing professional investor, dollar cost averaging strategy beats trying to time the market.
@@longhornmed yeah but using a dataset from 1900-1930 didn't really prove the point. For me, at least. Something contemporary would've been better.
Ramin, I just listened to the podcast and it was excellent!
Thanks @spacemanspiff
"Time in the market beats timing the market."
No it doesn’t. Sell high but low. Rinse and repeat
Loved the video. But can't help think that the comparison should have been between lumpsum investing and buying the dip.
Best return... Pile up cash and invest after market meltdown, hold 7-10 years then sell... Wait for next market meltdown. Rinse and repeat. Easier said than done though.
Drip feeding is easier for index, you have your monthly budget and you stick to it. For single stock though, if you are into it, you can decide that you only take let's say 1/4 or 1/3 of a position and then only buy more if the price drops a certain %, if it never does you stick to that lower sizing position for that given stock. Of course, if the reason for the drop in price would be idiosyncratic and make you reconsider the quality of that stock you do not double down... only if the drop is related to overall market volatility and you are not concerned particularly for that company
Apple, Tesla, Microsoft all have earnings next week. When those companies beat Wall St estimates, the whole NASDAQ and SP500 will shoot up. Then it will correct. Ad infinitum. And equally, this the best time to buy Large cap growth because the next rotation later this year into Tech will see your gains exceed what they were before. Buy low, sell high. Be greedy when others are fearful.
Wait for a dead cat bounce and short from the top of the resistance. The resistance point will be very clear.
Yes bit you've forgotten the cost/transaction cost of buying continuously (i.e. drip feed incurs more spread costs, FX costs, and other transaction costs no? Please try to model this and see whether your hypothesis still works.
Interest in a hybrid scenario. It feels like the "buy the dip" scenario is very sensitive to the % drawdown. What if you do 75% of your monthly income into drip feed, but continually hold back that 25% until a x% drawdown?
Just keep buying as you've been doing, be consistent every month. Nobody knows exactly the bottom, don't mess with it, consistency is key. Just my opinion. The average person doesn't know the charts.
Agree 100%. don’t know where the term drip comes from since this has been known as dollar cost averaging for the 40 years that I’ve been investing. That’s the reason why professional money managers can’t come close to beating the average person who just participates in a 401(k) and has the same amount taken out of each paycheck put into an index fund. You’re automatically buying less shares at highs and automatically buying more shares at lows. I am firmly convinced that technical analysis is just nonsense and completely unnecessary for 99% of investors. And if people would think INVEST, not trade, they could wisely just ignore the charts
Stay away from charts.
Valuations count.
Useful video Ramin Thanks.
I am glad it was helpful
Does it have to be either/or? Surely a combo of buying the dip and drip feeding has a chance of producing superior returns?
Thank you for the video, very informative!
My pleasure!
Thank you as always for your spectacular content Ramin
Glad you enjoy it!
I do DCA no matter how market situation. For 30 years and reinvestment the dividend.
Drip feeding.... excellent advice. 👍 thanks
Excellent findings Ramin. Im an advocate for drip investing
Thanks
What happens when “you accumulate cash” you use that money to offset your mortgage at 3-4% in a flexible mortgage??? Does that change the outcome??
Buy the dip on the way down and on the way up!!!! Nobody can time the market!
Buy the dip works, but on particular stocks, not the index.
Or on crypto witch has waaaaay higher volatility
No, buying the dip is terrible for stocks if you are buying a falling stock averaging down is bad. Averaging down an index will work long term because the index will remove bad stocks and better ones will be added. I would rather myself, instead of monthly drip feeding, just buy the market whenever there is a down day. That has to be better than buying at random monthly at possibly a monthly market peak!
Whats the difference from US stock market to Brazil 🇧🇷 also do you consider the GDP and economic strength in BTD strategies?! Thanks for insights
Supply and demand are causing price changes. Real dips happens rarely and often the participation is named speculation. You'll be lucky to have 1-2 dips lifetime in the sectors you understand and you'll be even more lucky to have liquidity when this happens. The economy is working the following way - once demand is higher than the supply in the next 20-30 years we have overproduction
I think you mean when supply is higher than demand we'll have overproduction right? At the moment demand is definitely higher than supply. Used cars are a prime example of this because of the chip shortages for newer built cars. Cathy Wood speculates that inflation will be transitory once we're able to get supply chains moving normally again. Of course that's a big "If"
In the comments some people are talking about a hybrid strategy - drip feed as well as invest in dips. Well, given the recommendation in the video, isn't that extra money you will be putting in during the dip would have as well performed better if you had invested in drip feed?
very useful information thanks !!
You are welcome!
I thought it would make sense to just drip feed money in consistently every week or month for years while also having some money in reserve to buy the dips when they come. If you do that for 30 years perhaps you'd get the best of both worlds
I second that and assume it would outperform on average (i.e., progessively pull from your emergency fund as the market drops, but have everything else invested.)
He is picking up 100 year period recent 20 years everything changed. Everything depends how feds act. Japan started it in 1980 USA 2008. So forget these nice charts. Try to do research online and listen what famous investors say not this.
well, given the recommendation in the video, isn't that extra money you will be putting in during the dip would have as well performed better if you had invested in a drip feed?
@@v-4-vendetta Yes. But if you happen to have extra money you haven't invest, you should buy the dip. Or pull out of an emergency fund or other "safe" assets.
60% and even 20% dip examples are pretty extreme so makes sense why this extreme does not work. What about a mixture of the two? What if you consider your "dip" more like (for example) 3-4%? By nature, these level of dips are far more frequent and if you buy in at each of these smaller dips, you end up with a combination of (1) buying dips (dip) and (2) a more frequent steady purchase into the market (drip).
Informational analysis TY
It even performs better if you drip feed to a well diversified emerging markets portfolio while US seems to be overbought.
The best time to buy is: if vix above 25%, buy when vix collapsed more than 30% from previous high…it has been working so far since a long time….
I was reading that in the 1930s dividend income became a much greater proportion of total returns, so if people were not in the market they would have missed out on the dividend income and it took years longer for their investments to recover.
This is more true for index investing. But buying the dip works for individual stocks. I'll have stocks that dip down while others run up.
For example, I sold a portion of my xom recently, bought some baba, cost, and Microsoft with that. Will buy more stocks as the market keeps dropping
Now do that for Japan stock market :)
Excellent analysis
Thank you
I would do both - More fun than only regular drip feed.
So the question is, what performs better in case of long-term trend of declining equity market, such as in Brazil since 2008? Will buy-the-dip approach perform worse here too?
Haha, with a failing investment like Brazil, the only strategy is to get out asap.
Excelent video!!
Thanks
Well, you time the market, buy the dip sell the rip for individual stock, not an index fund as the dip in individual stock is significant makes it worthy in term of Risk/Reward. In your example you are using an S&P 500 an index fund not an individual stock. Also, you buy the dip very selectively, only for high conviction stock with good fundamental, and good sign they will recover, not blindly buy the dip every single stock just because they fall significantly.
After you make your conviction, you are still using technical analysis (charting) to gauge the best entry point. Reasonable number of acute retailer traders beat the market using that method. Certainly, majority of people can not do that as it will need both fundamental and technical skills (reading the chart). Traders are even using leverage to optimise the price movement.
It is very easy to see when you see a good stock in S&P 500 drop significanrly not because of fundamental change, you identify the bottom and buy the dip in a smaller chunk, not in one go. When you miss the boottom and it fall further down, you do DCA while moving down. Mega caps stock in S&P 500 will always go back to ATH.
Didn’t understand the use of the Brazilian index when you have the ftse available much closer to your home accent which hasn’t really had a high since 2008 or was it 2001??
But what am I supposed to do with all my chips?
How much would you pay as commissions to your brokers for that dripping? The cheapest as I know in UK is iWeb share dealing service which is still £5 per trading action.
What if you combine the "Buy the Dip" with a sell strategy, "Sell at the top"? Would be interesting to see the result of this as well.
I have been doing that to scale in. I buy 100% at the bottom and sell 50% on the pops. It helps me to accumulate shares while preventing catastrophic losses.
It’s called value averaging and it has some advantages. The yield depends on implementation, cash availability and market factors.
Yea but then you have to be right twice, and you will never know if tomorrow the market will go even higher than the top today.
I would rather myself, instead of monthly drip feeding, just buy the market whenever there is a down day. That has to be better than buying at random monthly at possibly a monthly market peak!
I suppose the numbers are for 100% s&p, what would a modern 60:40 shares/bonds look like.
How would the same scenario look if you were to buy value stocks in your "build cash position" periods and switch to growth stocks in your "buy the dip" periods?
Hi @Sarchmaster interesting question, I haven't tried that. Thanks, Ramin.
I was thinking something similar. Rather than look at market value as "the dip", look at price to earnings/value and when that drops by the percentage brackets, see how that works out. I think we'd still see drip feed come out on top, but I suspect the alternative strategy would be much closer and have more data points above the reference.
Did bother to include the risk free rate of return on the cash?
How about trend following strategy? seems to work even better than drip feeding as it elimnates extreme portfolio drawdowns all together
are you able to share the R code for the graphs please?
Unconvinced. You would never just build up cash, you'd have it on deposit or even in bonds and switch to equities on the dips. This would transform the figures presented here....
What about a 1 month lookback period, rather than 1 year?
There is a cost to accumulating cash for 10 years. |t devalues by inflation minus savings interest. And it's not receiving corporate dividends.
Merci Ramin jaan, informative as always
My pleasure
Why would you not consider selling when your stock is high 50%/100%?
Why would you wait for 30 years?
Would you consider making a video on opposing scenario? When to sell?
You sell when you need the money. Otherwise you let the profits run.
Result would be very different when applied to Brazilian market…
Those who didn't buy the dip yesterday missed it. The key is to buy equities from financially sound companies (relatively low debt) with good earnings and valuation. Stocks that are profitable enough to pay dividends are a good choice.
I think we haven’t seen the real bottom
@@diegoramos27 I think you're right
is there a source or chart that shows many etf's sortino ratio so we can compare please.
Great stuff
Thanks
@@Pensioncraft Ok, so you have proven that buying the dip doesnt work over a long period of time. But then why do I get that feeling every time my favorite stock dips that if only i would have kept the capital for later, like today, I could have bought 1.2 or 1.3 or 1.5X more shares of the same stock that i love anyway?!
Hi Sir. Which vanguard etfs have you bought this year for your Isa allowance ?? Please reply when free .. Thanks 🙏 in advance
Vusa, Vmid, iitu, icdu, vwrl
Thanks!
Welcome!
Ramin, have you analysed a combination of the two? Monthly drip feeding AND deploying capital if markets correct (fall greater than -10%). Thoughts on that approach?
well, given the recommendation in the video, isn't that extra money you will be putting in during the dip would have as well performed better if you had invested in a drip feed?
Well I was dip feasting early 2020 and I am not sorry. Only regret was selling too soon.
While this video makes some good points it overlooks the fact that most dips that are being bought today are as little as half a percent. What they actually mean is buy and buy and buy and buy. And their trading experience, well about April 20209
2020
Surely lump sum investing outperforms DCA? I'm certain you did a video about it.
Anyway, I'm currently DCA into my S&S ISA, however I have a pretty sizeable cash balance to invest should the market decline by 20-50%. My strategy being buying at pre-determined levels 20%, 25%, 30%...... 50%. That way I'm just sizing up my DCA and having the opportunity to buy at lower prices. As you said, the market generally trends up, so after 20 years all those positions should be very much in the green.
Just my thoughts.
20%-50% of what threshold? Just previous peak or 2-5years average?
Inflation is eroding the value of your cash.
What if you do both?
For example, someone drips every month and the months that the market is below the 1 year high then double the drip that month?
Would this be the best of both worlds?
well, given the recommendation in the video, isn't that extra money you will be putting in during the dip would have as well performed better if you had invested in a drip feed?
@@v-4-vendetta , no the difference is not an indication of relative gains it's more about how those gains are being acquired over time and how you can psychologically tolerate the differences of the two strategies.
Buy the dip way beats the market the past few years since there has been so much volatility. Some things have dipped and rebounded seven percent five times over the past year alone
Past success has nothing to do with future success
Decided things are a little too volatile at the moment, am now investing the same amount weekly rather than monthly. Seems like the best way to have both. Would be interested in seeing a historical comparison of drip feed frequency & performance.
What if you only buy the peak, which is what I seem to do? 😫
How much time did take for you to calculate all that?
I thought studies showed 2/3 rods of the time lump sum worked better.
Holding treasuries rather than cash might make this look significantly better, no. Some appreciation during the holding period, and especially highly valued during an equity crash. I would love to see a comparison.
Does this include dividend payouts?