What are the pros and cons or people’s views between regular investing - v - buying the dip?
My view is that I am not Warren Buffet. I can’t beat the market so I’m happy to just invest regularly over the longer term.
If you can find the dip on time, definitely buy as much as possible.
DCA and keep some ready for any large dips
DCA has been proven to be the most efficient.
Of course it’s also prudent to have some cash on hand, should you have your eye on a particular company.
It’s better to be in the market opposed to waiting on the sidelines.
What if someone did DCA or bought the dip on Nikkei since 1990? Or if only stayed in the market?
Graph showing Nikkei 225 from January, 1970 (End of Month).
Nasdaq Composite only took 15 years to be back to pre-dot.com levels, better than Nikkei 225, that took the double of the time.
Don’t bring up Japan please! It’s the thing I’m always mindful of when investing over a long period of time!
With that being said, you would of picked up some awfully cheap shares in an index via DCAing anyways
It’s always good to remember or learn new things.
A lot of people think that financial markets always go up, and bounce very fast from their lows.
E.g. 5 years is a sure thing for profiting in the financial markets, as a lot of asset management firms advise to hold their funds for a minimum of 5 years to get some profit.
NASDAQ took 15 years to recoup all the dot.com looses.
I would rather set and forget than try and time the market. I’m just not convinced we can do that on 212 at the moment, well not without paying the 0.7% card deposit fee?
True if one had only bought at the peak of the bubble, and held all the way.
Inaccurate if one had kept regularly buying, even with his first few purchases before the peak, DCA would have turned green in about 5 years.
And then there’s everybody who’ve been selling the dip 🤷
First key thing is make investing regular even if its saved in cash. What I mean is set up a regular deposit of cash into your brokerage account whether T212 or other.
Now in terms of timing the market, just don’t, but there is validity in favouring some holdings over others at different prices as as your new funds come in there might be illogical reasons a stock has dropped or run up.
Good post. This is my approach at the moment.
Regular investment, but flexing based on value (approximate P/E ratio). Sometimes adding one-off chunks if something looks particularly good value.
Here are some pretty crazy stats: of almost 4,000 stocks/ETFs since 2011, only about 15% of these earned returns of >17.5% annually. Basically, it was more likely to lose money than to compound it by at least 17.5% a year.
If you go back even longer I think it’s only the top 4% of stocks that drive the returns. I can’t find the article though.
It also shows that random selection would result in 25% of your stocks making a loss. That probably highlights why people recommend sticking with index funds. Even the professionals struggle to beat that 48% of the time!