It always baffles me why people try and time the market, when the overwhelming data is that it doesn't work as effectively as investing at regular intervals. I buy into the market every month when my superannuation payment comes in and sleep soundly at night. I also occasionally buy stock outside of my retirement fund. People overcomplicate this stuff and don't need to.
“Buy the dip” is a fool’s strategy. Nobody can possibly know where the bottom is. Buy-and-hold is the best strategy. It is the only way to ensure your money fully participates in the market and guarantees you are present for all the market gains. Yes, you will experience all the lows, but history has demonstrated the there are larger gains than losses over the long term and only a few days per year that are responsible for those gains. And many of those big daily gains don’t necessarily follow a “dip”. You are likely to miss many of those gains if you are constantly holding money out of the market waiting for this hypothetical “dip”. “Buy the dip” is just a form of market timing. All the evidence has shown over and over again that market timing just doesn’t work. Thanks for posting this video and providing valuable, important advice. 👍
Our ancestors bought a plot of land, and farmed it for a lifetime or multiple generations. They didn't sell it or buy more based upon the villager's predictions of land prices. Most of us should probably do the same with our stock investments. Compound growth of stock investing is highly under appreciated.
As I get older (I'm 73) I have less and less in stocks. I have been in the game for a long time, and frankly I find it more frustrating and disappointing than good.
At your age you should be less and less in equities anyway I would think. There isn't as much need to pay the risk premium of the stock market after retirement age. I think most advisers would be telling you to go to a mix more weighted to bonds, fixed interest and cash.
I've seen a few of such studies, and each one only shows the "vanilla version" of the BTD. I would like to see the results, but when doing something more interesting with the cash that just hoarding it before the trigger. For example, I'm curious how BTD would perform, if the cash was invested in long-term bonds, short-term bonds, gold, or in a different market that was not ATH at the time, while awaiting the dip on US market.
You're doing a fantastic job! A bit off-topic, but I wanted to ask: My OKX wallet holds some USDT, and I have the seed phrase. (air carpet target dish off jeans toilet sweet piano spoil fruit essay). What's the best way to send them to Binance?
Depends. One could say that rebalancing after a downturn would share qualities with buying the dip. Rebalancing after a surging market would be the opposite.
Doesn't this depend on the risk free rate of return? For example, if you were waiting for the "dip" in 1987, you would have been in risk free assets returning >9% for years. T-bills and cash. But if you were holding cash post 2008, the risk free rate was poor, so DCA would have made more sense.
How do the studies handle the cash part? Do they assume 0% growth? I wonder if it would alter the data at least a little if the money was in savings, TBills, or bonds. That would mimic more realistic scenarios for people, especially if they chose the bucket method.
Generally speaking a static cash rate is used, ex. 3% per year, or TBill rates are used. We used TBills and I believe Dollars and Data charts did as well.
Thanks for the interesting content! 😍 I’ve got a question: 🤨 I only have these words 🤔. (behave today finger ski upon boy assault summer exhaust beauty stereo over). Can someone explain what this is? 😅
The main issue with lump sum is SORR and timing of when you need to use the invested funds. If you had recevied $1.5M at the beginning of 2022 and you're 60 years old and put all of it immediately into a balanced (60/40) portfolio, you would be under water by $95K as of today and would have suffered a 20% drawdown in that timeframe (a drawdown period that is also still ongoing). No doubt that might cause you to lose some sleep. Sure, if you don't need to use your funds for at least 10 years, there's a decent chance you will have a positive outcome by the end. Also, don't forget that since the year 2000, markets have changed dramatically compared to pre-2000 times. Market returns over the last 23 years have been lower and more volatilite than before. I chalk this up to changing demographics, globalization (and now de-globalization), information technology, various crisis, and increased speculation, among other things. Many of these factors are not going away, and in fact may be accelerating.
Yes, Roth Conversions on a dip can be a great strategy. A key distinction with a conversion on a dip is that investment allocations aren't changing as they are with buying the dip.
Have you analyzed "Reallocate the Dip"? Incoming money always goes right in as a lump sum. However, you reallocate your portfolio on the dip, moving it from say 60/40 to 70/30 on a 10% dip in the S&P500 and then to 80/20 if it continues to a 20% dip and so on. Once the market (let's say S&P500) has recovered to the previous high, go back down to the allocation that you want long term. An analysis of gradually unwinding the changes so that at the high you start to reversing the previous allocation changes might also be interesting. Given the previous scenario of a 20% dip, at the high go back to 70/30 and at some amount (5% gain over previous high?) go back to 60/40.
You likely used the term "naive" to describe DCA as a bit of a head-fake. But "naive" better describes those who advocate buying the dip. That's why you see so much of it on Tik-Tok, and other social media.
Yep. By the time you have convinced yourself that buy the dip just doesn’t work the hard way, you’ll have been through 2-3 downturns and blown a couple of decades of reduced growth. These results neatly sum up that “time in the market is better than timing the market”. Whatever absolute lunacy and outrageously irresponsible bullishness the market is pushing today, it is nearly guaranteed that in ten years that will look cheap and certainly by 20 years. In 3 years maybe not, but if that is your time horizon you likely need to put your retirement in more stable asset classes.
Here is a strategy - Buy when price has closed above 195 Daily moving average 3 consecutive days in a row. Purchase on the 4th day Sell when prices closes below 195 Daily MA for 3 consecutive days in a row. Sell at close of 4th day Trailing Stop Track high point of price after you buy based on the daily closing price Once the etf/mutual fund closes 7.5% off the high point since you have bought it and it is still above the 195 daily moving average, sell at the close of the next day If the price never goes below the 195 Daily moving average once you trailing stop is hit buy back in at the price once price reaches your trailing stop sell price
Here is a better strategy. Buy as soon as you have money to invest. Sell only if you NEED the money. If you don't actually NEED the money, don't sell. If you never NEED the money, leave it to your kids.
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It always baffles me why people try and time the market, when the overwhelming data is that it doesn't work as effectively as investing at regular intervals. I buy into the market every month when my superannuation payment comes in and sleep soundly at night. I also occasionally buy stock outside of my retirement fund. People overcomplicate this stuff and don't need to.
I do both
“Buy the dip” is a fool’s strategy. Nobody can possibly know where the bottom is. Buy-and-hold is the best strategy. It is the only way to ensure your money fully participates in the market and guarantees you are present for all the market gains. Yes, you will experience all the lows, but history has demonstrated the there are larger gains than losses over the long term and only a few days per year that are responsible for those gains. And many of those big daily gains don’t necessarily follow a “dip”. You are likely to miss many of those gains if you are constantly holding money out of the market waiting for this hypothetical “dip”.
“Buy the dip” is just a form of market timing. All the evidence has shown over and over again that market timing just doesn’t work.
Thanks for posting this video and providing valuable, important advice. 👍
Good content and discussion Eric. Should answer questions some may have. Larry, Central Valley, Ca.
Eric and Team- Great analysis - simple is always best.
Our ancestors bought a plot of land, and farmed it for a lifetime or multiple generations. They didn't sell it or buy more based upon the villager's predictions of land prices. Most of us should probably do the same with our stock investments.
Compound growth of stock investing is highly under appreciated.
Thanks for the podcast,it look
Time in the market beats timing the market.
As I get older (I'm 73) I have less and less in stocks.
I have been in the game for a long time, and frankly I find it more frustrating and disappointing than good.
At your age you should be less and less in equities anyway I would think. There isn't as much need to pay the risk premium of the stock market after retirement age. I think most advisers would be telling you to go to a mix more weighted to bonds, fixed interest and cash.
@@adam872
Not true. Watch Rational Reminder video with Ben Felix and Prof. Scott Cederburg.
I've seen a few of such studies, and each one only shows the "vanilla version" of the BTD. I would like to see the results, but when doing something more interesting with the cash that just hoarding it before the trigger. For example, I'm curious how BTD would perform, if the cash was invested in long-term bonds, short-term bonds, gold, or in a different market that was not ATH at the time, while awaiting the dip on US market.
You're doing a fantastic job! A bit off-topic, but I wanted to ask: My OKX wallet holds some USDT, and I have the seed phrase. (air carpet target dish off jeans toilet sweet piano spoil fruit essay). What's the best way to send them to Binance?
Is re-balancing a portfolio to return to a target asset allocation "buying the dip"?
Depends. One could say that rebalancing after a downturn would share qualities with buying the dip. Rebalancing after a surging market would be the opposite.
Doesn't this depend on the risk free rate of return? For example, if you were waiting for the "dip" in 1987, you would have been in risk free assets returning >9% for years. T-bills and cash.
But if you were holding cash post 2008, the risk free rate was poor, so DCA would have made more sense.
How do the studies handle the cash part? Do they assume 0% growth? I wonder if it would alter the data at least a little if the money was in savings, TBills, or bonds. That would mimic more realistic scenarios for people, especially if they chose the bucket method.
Yea cash paying 5.5 justifies buying dip
Generally speaking a static cash rate is used, ex. 3% per year, or TBill rates are used. We used TBills and I believe Dollars and Data charts did as well.
Thanks for the interesting content! 😍 I’ve got a question: 🤨 I only have these words 🤔. (behave today finger ski upon boy assault summer exhaust beauty stereo over). Can someone explain what this is? 😅
The main issue with lump sum is SORR and timing of when you need to use the invested funds. If you had recevied $1.5M at the beginning of 2022 and you're 60 years old and put all of it immediately into a balanced (60/40) portfolio, you would be under water by $95K as of today and would have suffered a 20% drawdown in that timeframe (a drawdown period that is also still ongoing). No doubt that might cause you to lose some sleep. Sure, if you don't need to use your funds for at least 10 years, there's a decent chance you will have a positive outcome by the end.
Also, don't forget that since the year 2000, markets have changed dramatically compared to pre-2000 times. Market returns over the last 23 years have been lower and more volatilite than before. I chalk this up to changing demographics, globalization (and now de-globalization), information technology, various crisis, and increased speculation, among other things. Many of these factors are not going away, and in fact may be accelerating.
I've heard do Roth conversions on the dips.
They have a video on this... take a look it's a good analysis
Yes, Roth Conversions on a dip can be a great strategy. A key distinction with a conversion on a dip is that investment allocations aren't changing as they are with buying the dip.
Sounds like a game of Rock, Paper, Scissor.😊
Have you analyzed "Reallocate the Dip"? Incoming money always goes right in as a lump sum. However, you reallocate your portfolio on the dip, moving it from say 60/40 to 70/30 on a 10% dip in the S&P500 and then to 80/20 if it continues to a 20% dip and so on. Once the market (let's say S&P500) has recovered to the previous high, go back down to the allocation that you want long term.
An analysis of gradually unwinding the changes so that at the high you start to reversing the previous allocation changes might also be interesting. Given the previous scenario of a 20% dip, at the high go back to 70/30 and at some amount (5% gain over previous high?) go back to 60/40.
You likely used the term "naive" to describe DCA as a bit of a head-fake. But "naive" better describes those who advocate buying the dip. That's why you see so much of it on Tik-Tok, and other social media.
Yep. By the time you have convinced yourself that buy the dip just doesn’t work the hard way, you’ll have been through 2-3 downturns and blown a couple of decades of reduced growth. These results neatly sum up that “time in the market is better than timing the market”. Whatever absolute lunacy and outrageously irresponsible bullishness the market is pushing today, it is nearly guaranteed that in ten years that will look cheap and certainly by 20 years. In 3 years maybe not, but if that is your time horizon you likely need to put your retirement in more stable asset classes.
Using data to evaluate investment strategies... what kind of black magic is this?
Here is a strategy - Buy when price has closed above 195 Daily moving average 3 consecutive days in a row.
Purchase on the 4th day
Sell when prices closes below 195 Daily MA for 3 consecutive days in a row.
Sell at close of 4th day
Trailing Stop
Track high point of price after you buy based on the daily closing price
Once the etf/mutual fund closes 7.5% off the high point since you have bought it and it is still above the 195 daily moving average, sell at the close of the next day
If the price never goes below the 195 Daily moving average once you trailing stop is hit buy back in at the price once price reaches your trailing stop sell price
Here is a better strategy. Buy as soon as you have money to invest. Sell only if you NEED the money. If you don't actually NEED the money, don't sell. If you never NEED the money, leave it to your kids.
Good luck!
What are the odds that something as specific as 195 day moving average with a 3 day wait is robust?
The wait is to keep one from getting whip-sawed.
The strategy is from Ulli Newman from the ETF Bully. Ulli is an investment advisor. He has a free e-book with the backtest results