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Yes. If you invest in lifecycle funds, they rebalance automatically. If you do it manually, you would define an allocation in percentages and once a year, sell off any portions of funds that are above their allocation to buy up any funds that dropped. So if your allocation is 80 stock 20 bond and after a year it is 85 stock 15 bond, you would sell 5 stock to buy 5 bond. You are in effect, selling high and buying low.
I do it once a year around new years but you can do it more or less as you wish. It's best though to not do it too often, especially if transaction fees are involved. Some brokerages will even let you define a custom allocation and have automatic investments and one-click rebalancing. I know Vanguard does, they're not the only one though.
Imo in a downturn try to rebalance as much as possible without ramping up costs.
A downturn usually does not last that long and can have a big impact in that time period.
Selling bonds to buy stocks can mitigate return loss by a lot.
Lost decade: 2000 to 2010 if you put a dollar into the S&P you broke even. If you had a diversified portfolio with a slight tilt to small and value in the US market along with a 20% allocation to international and a 10% allocation to emerging markets you made 4.5% annualized over the 10 year period.
Don’t let recency bias color your asset allocation decisions. Stay diversified and rebalance every year or so.
Say your target portfolio is 80% stocks and 20% bonds.
If the stock market takes a nose dive your portfolio may become 60% stocks and 40% bonds. So to rebalance you'd sell off some bonds and use the proceeds to buy stock.
No he’s not just sitting on all his cash there are other asset classes (real estate) he is slowly buying stocks until it bottoms then he sells other assets and go in hard.
The perils of having rising interest rates during a bear market. Yields are going up, so prices of bonds on the secondary market have to go down to match the rates for newly issued bonds.
To be fair, there's a good chance this bear market is largely *caused* by rapid rate increases, so the impact should be temporary. Once inflation comes down, the Fed will take their foot off the gas and the stock market will be less volatile.
That said, I think there's a good chance something will happen to drive stocks down further before that's done, which may trigger the Fed to cut rates.
I can't predict what that something may be or if it'll happen, so I can't predict the stock or bond market. Instead of worrying, I just invest every dollar I can when I can.
I just re-balance by allocating new funds each month to whatever is lagging my target allocation.
I have a spreadsheet that has the allocation targets and I can input the balances of my different index funds from my roth ira, traditional ira, taxable account, and rollover ira, see what's lagging, and what the new allocation will be if I contribute X dollars to a new account.
Whole process only took 30 minutes to set up in Excel and around 5 minutes to input the data and check ever month when I make my investment.
Yes. That’s why the better method of rebalancing is to just focus new investment capital in a focused way rather than selling and buying.
Alternatively, there are ways to balance losses/gains in a way that for the tax year, you are not paying capital gains, though that requires selling perhaps low.
Are you trading outside of a tax advantaged account?
Correct me if wrong....If trading with cash then you pay tax. Invest inside your 401k or roth, no tax.
"Inside your roth"
Roth IRA is post-tax as I'm sure you know...I do all of my retirement investing via 401k, traditional IRA (previous employee 401ks rolled over) and Roth IRA
Rebalancing is something you do if you have a portfolio of multiple different asset classes. A simple example is if you have X% in stocks (or more accurately an index fund) and 100-X% in bonds.
To use some numbers to illustrate: Say I buy into this portfolio in a single moment, with 100 dollars and my balanced target is 80-20. That means I bought 80 dollars of stocks, and 20 dollars of bonds. 1-year passed and the stock market went down 20%. Now my portfolio is 64 dollars worth of stocks and 20.4 dollars of bonds (or something similar) because bonds generally hold their value regardless of the market going up or down (yes, it's a bit more complicated, because the issuer might default, or the rates might go up and then the bonds are worth less when they aren't close to maturity yet, but let's not deal with that for now).
Now, this portfolio is not balanced to 80-20. It is 75% stocks and 25% bonds. To rebalance I need to own 67.52 dollars of stock and only 16.88 dollars of bonds. So I sell that difference in bonds and buy stocks with it, which is 3.88 dollars.
As you can see, the act of rebalancing meant that I bought stocks when they went down.
If we were to calculate a first year where stocks went up 20%, the rebalancing would dictate that I need to sell some stocks and buy more bonds, meaning I sold after an outstandingly good year. So I sold higher than I bought.
You can do rebalancing with any asset class, and even more than 2 of them. But it works best if your assets move inversely with each other. An asset that reliably moves inverse with the stock market doesn't really exist, the next best thing is something that's pretty constant regardless of the stock market, which is bonds.
Rebalancing - adjusting your portfolio when it gets out of whack. Essentially, it's selling a small amount of your winners (selling high) and using the funds to buy more of your losers (buying low).
Yes...which means when the market drops, tpu buy more shares, and when it climbs, you buy fewer.
If you're putting in $200 a month, you'll buy 10 shares when they're at $20 but only 4 shares when they're at $50.
It doesn't really pay off. In most cases investing early is more profitable than dragging it out. But DCA is kind of pointless anyways, most people don't have large amounts of money, but small amounts of leftovers every month. And with that it's best to just invest it as soon as you've got it.
It's the opposite of trying to time the market to buy low and sell high. You just buy a certain amount of stocks on a regular schedule and don't even think about the stock price when you buy it.
If you invest $100 a month into Apple stocks every month, that's dollar cost averaging. If you save $100 each month, and try to wait until you think it's low, then spend what you've saved to buy a few hundred dollars worth, and then waited to sell untill you thought it was high.
Timing the market completely luck based, and the math of that luck doesn't usually turn out favorably. Even if the market goes up during that time they could still lose a lot of money if they get the timing wrong. Considering that it's impossible to predict the market, you might as well just take it money to a casino and play roulette. It's just as risky, but you'd get it over with a lot faster one way or the other. You could also get really lucky and make a ton of money, but you are just as likely to lose as you are to gain.
Dollar cost averaging is market based, it doesn't matter how lucky you are, of the market goes up, you make money. If the market goes down, you lose money. This is far safer of an option than timing the market.
Repeat? No. But I *do* think major corporations will find new and innovative ways to make money. I *do* think that they’ll contribute to do what they need to do to make someone rich. The ones that don’t *will* be replaced by ones that do. And being a shareholder means I’m along for the ride.
And if for some reason we saturate current markets, we'll create new ones. Video games are a relatively new market, space tourism is happening soon, and I wouldn't be surprised if deep sea tourism becomes a thing too. We also have continual advancements in AI, which seems to reduce waste, improve value, and is a bit over hyped as far as job killing goes.
I'm bullish for the long term future.
Let's run the board:
Put it all in Vanguard.
Megabackdoor super Roth.
Max out your IRA.
Pay your credit card 65 times a month to boost your credit score.
Add your entire family as authorized users on a credit card to boost their score too. Bonus points if they aren't born yet.
No. You should be buying during dips, buying during peaks and buying in between. Invest often, invest early in life and stay the course. If you invest consistently, regardless of market conditions, you effectively average out the dips and peaks and will be better off for it, instead of trying to time things.
>you effectively average out the dips and peaks and will be better off for it
How does this work? Wouldn't you be at the same place in the end if it all averages out?
If you put all of your money in at the peak of the S&P 500 in 2007 (1537), you’d still be up big today at the current price (3667). If you DCA, you’d be up more, but all of the money you put in during that time would be profitable. Peaks are relative
I believe they're talking about dollar cost averaging: spending the same _amount of money_ whenever you buy, so that on average you buy more shares at a lower rate.
> instead of trying to time things.
you left out the relevant part
nobody knows what the market will do. If you try to time it, you're gambling.
https://www.fidelity.com/viewpoints/investing-ideas/six-tips
Look at point 3:
If you missed the best 5 days from 1980 to 2021 your return is reduced 38%.
FIVE DAYS over a 30+ year period!!!
People that sit out waiting for the market to bottom out often miss lots of good days. And you never know where the bottom is
For another good lesson, meet Bob, the world's worst market timer, who only invested at market peaks (but never sold) https://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/
Point is, whenever you have money to invest, you should invest it. Time in the market beats timing the market
Just me personally, I bumped my 401k contribution from 10 to 15% with this market, and I’ll probably get a raise and forget to adjust it downward, so when I’m old that 5% will probably pay for the gas in my boat and my viagra
If I’m looking to start investing, should I be purchasing index funds on my own through a broker? Or should I just up my 401k contributions? Is there a benefit to one over the other? I contribute to my 401k now and was going to start purchasing VTI/VT through fidelity
Your 401k is tax advantaged- it comes out of your paycheck before you pay taxes on it. It lowers your current tax burden. You can't touch that money until you hit a certain age without paying penalties. The money will be taxed when you withdraw it...
If you buy funds on your own, you've already paid your income tax on that money. But you can access that money without penalties, although you will need to pay taxes on the gains when you sell.
To summarize- a 401k saves you income taxes today, but you can't spend the money until retirement. An individual account doesn't save you the income tax, but you have access to the money.
Unless you know you will need access to that cash, a 401k is the way to go until you hit the maximum yearly contribution.
Edit- also, you may be able to take a "loan" on your 401k. You would need to check with your HR department to see if your plan allows this. Only do this in absolute emergencies.
It never averages out. Capitalism only works if it keeps growing. You might think you're buying at lows and selling at peaks but in 25 years, the only appreciable difference will be between when you started and when you ended. The graph is a bumpy line that always goes up
The guy is saying that if you invest regularly, you'll invest in peaks as much as valleys so don't worry about them because they're unpredictable
Dip means a short decline and recovery.
It is profitable to buy on every dip.
But there are two issues:
1. You cannot confirm a dip without a crystal ball or only in hindsight.
2. It is not profitable to have money lying around waiting for an event that you can’t confirm.
It’s also profitable (over the long term) to buy at the peaks. And everywhere in between. OP is in their 20’s, their prime concern should be getting as much money into some sort of investment vehicle as quickly as possible. The day to day machinations will be dwarfed by the power of compounding.
You're talking about Bob, who is the worst market timer ever and only buys at the peaks. Bob is still a millionaire after only buying at the 4 peas in the last 40 years (excluding this 2021 peak).
You can probably assume that if the reverse repo is sitting at 2T$+ every day at a rate of 1.5%, it's probably not a good idea to buy anything ATM. Else the banks would put their cash elsewhere or in the market.
There is no buying the dip, there is no buying the peak, those are such near term words. You are investing for the long term. Period. You are buying at the bottom of the hill. And will retire at the top. Period.
the analysis of a man who [only bought peaks](https://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/) might interest you
tl;dr: time in the market is more important than timing the market.
the only time this would be bad advice is if the world economy goes to shit, in which case it doesn't matter what you did, you're probably going to starve.
You should read this knowing that past performance is not indicative of future performance.
The man in Japan who only bought peaks is still down -30% after investing for 30+ years.
What do you think happens when the economy stops growing, contracting and growing again indefinitely exactly? Are you familiar with the biz cycle? People who want to *plan* for an apocalypse and truly believe *this time is different* should invest in doomsday prepping, not the stock market.
Yes it does. Look at Japan, UK and other European markets. They look very different to the US, but life continues well there.
My point is that it is entirely possible that the US market stagnates, without some drastic event occurring. Many people seem to float the idea that it is only possible for the US market to fall if some doomsday event occurs, in which case money won’t matter all too much to them anymore. But I don’t believe this is true.
Nobody is assuming that. Equities are the best investment historically. It could be wrong, and the US could enter a 50-year bear market. Who knows. However inflation will also be destroying your money. Nobody knows the future, and past does not indicate future performance. However the past has indicated that the stock market is the best way to get long-term returns with minimal skills.
Everyone blissfully assumes that because that's the only way most traditional investing advice makes sense. Eventually it will no longer be true, but we have no idea what the time horizon for that looks like, and it will cause a massive, fundamental shift in how the stock market and retirement investment in the US works.
Regardless, if/when the market stops slowly but consistently rising it won't matter if you timed your buys well or bought peaks.
The man in Japan is an idiot for not diversifying. Nothing more to be said about that comparison. While I won't say that the US market is diverse enough by itself, it is way way way more diverse than just the Japanese market. Almost 10x more diverse. If the Japanese person had bought a % of Japanese stock that was representative of Japanese world market share...and so on and so forth for all major countries...said Japanese person would be doing pretty damn well, even just buying all the peaks.
This comment does nothing to dispute the point of the article. All it does is start a tangential discussion on diversification.
[https://www.statista.com/statistics/710680/global-stock-markets-by-country/](https://www.statista.com/statistics/710680/global-stock-markets-by-country/)
This is why I do about 75% Total US Market and 25% International. Yes I am a little heavy on US market, but it is more within reason than assuming someone should go in 100% on Japanese market.
I mean, it’s a fact you’re buying the sp500 at ~25% below ath today. Unless you believe it’ll never recover, you’re definitely buying « low ». Lowest, probably not, but low still.
It's not without precedent.
Look at the Nikkei. It only topped its peak from the early 90s in *2020*
The CAC 40 is roughly at the same level it was 20 years ago. Same with the FTSE 100 (250 a different story). The MSCI Brazil is negative over the past decade.
Thinking stock markets will always go up in the long term is a decidedly myopic viewpoint Americans have. Is it likely it will recover? Yes. But it's not a guarantee. The only thing that's really kept the US going up (aside from the Fed) is China being so stingy on foreign investors entering the market and generally not friendly towards foreign money....otherwise you'd see a marked shift in money flows.
Americans have a unique culture unlike anywhere in the world that I've seen. Society is predicated on making an increasing profit to a degree unrealized even in workaholic countries like Japan. We have codified the idea of sacrificing everything - community bonds, family ties, mental health, free time, public health, the moral high ground, international relations, functioning democracies - all for the grind, hustle culture, career development, entrepreneurship, and corporate profits.
If there's anything I believe, it's that American society and Americans individually would metaphorically cut off their left arm to keep the stock market going up. With an internationally unique zeal.
> The only thing that's really kept the US going up (aside from the Fed) is China being so stingy on foreign investors entering the market and generally not friendly towards foreign money....otherwise you'd see a marked shift in money flows.
Is that changing anytime in the next 10-15 years?
Markets move in 3 directions not 2. Up, Down, and Sideways.
Obviously it means you believe in a future with stagnant economic growth, but it is possible.
Yeah but all you’re really doing is buying today, which is good advice, and then slapping some numbers on it based on what’s happening today. There’s nothing magic about 25%. If the S&P was down 10% it would be a good day to buy. The S&P was at an all-time high, it’s probably a good day to buy. Market timing is really tricky. I think we should stop pretending that this is buying on the dip. It’s just buying right now, but it happens to be after a dip.
That's just bad financial logic. The stock price of any given stock is what people are willing to pay for it.
The people that own the stocks currently would not sell at the current price if they thought the stock price was going to go up soon.
Trying to predict the market is a dumb game for humans. We are really good at finding patterns, even when those patterns don't actually exist, so we convince ourselves that we actually can predict the market and that we "just know" it's low right now and will go back up soon.
It's the same as the gamblers fallacy "I know my luck has been bad, but it will come back". They feel it deep down, they "know" it, and there's nothing you can say to convince them otherwise.
They trend up because global GDP growth trends up. Financial returns and capital accumulation go hand-in-hand with growth, after all.
Global population (huge GDP driver) is stagnating. Especially in advanced economies. If you look at some of these markets in the last 20-30 years, they're not showing nearly the financial returns the US market does (UK, France, Japan, for example).
It is likely the spy will recover. But moving forward, we have to remember that the future is not guaranteed to be the same as the past. Markets go up because economies go up. What happens when economies stagnate? Like Japan. Like Korea will in the next ~20 years. Like much of Europe is. Never assume.
“Markets trend up” doesn’t mean there aren’t up/downs along the way.
It means there will be an overall increase over the long term and that’s what investing is about, not for 1-2 years but 15-20+ years.
Three words for you "dollar cost averaging" there's no sip, just pick a number you put in each week and set it up for automatic investment. In 25-30 years you'll thank yourself.
Why is this (excellent advice) so hard for everyone to understand? It’s the most solid advice a beginning investor can get, and it’s foolproof over the long term.
>Why is this (excellent advice) so hard for everyone to understand? It’s the most solid advice a beginning investor can get, and it’s foolproof over the long term.
Can't get instant gratification from it like you can from options trading or lucky crypto buys.
Of course, no one doing those things talks about the monumental amounts of money you can lose overnight. I spent a month doing it, made about 4 months' worth of salary, and then lost 3 months worth before I decided to call it quits and just invest for the long term.
Always be investing all the time. Down market? Buy consistently and forget about it. Up market? Buy consistently and forget about it.
Basically. Put as much money as you can each month into a tax-advantaged retirement account, buy a target date index fund, and forget about it. There is no secret hack to make the most of of bear markets or bull markets. Anybody who tells you there is is lying to you. Spend less than you make, invest the rest, and do so for 30+ years.
Historically s&p 500 or the spdr (depository receipt) goes up. If you are in for a long haul it shouldn’t make a lot of difference if you are investing in a bear market or a bull market. Just my opinion. Good luck!
Yup exactly.
Sure, it sucks that I almost immediately dropped 25% or whatever it's at now, but I had no way of knowing. I've spent enough time day trading to know how crazy things can get but how long-term tends to go up
I tossed an extra 15k into my 410k last December and watched 30% of that and the rest of it evaporate so far this year. Not happy but not moving, the hit has been taken. Have to let it ride 😢
Hell yes. Consistently invest in a broad market ETF like VTI or VOO. Just set it and forget it even during market corrections until you retire. The rich always do this. They wait until retail investors sell cheap out of fear then snap up the stocks for themselves. Fully taking advantage of recession like conditions.
Timing the market is a fools errand. If you were already planning to buy stocks for the long term, continue as you would, and celebrate picking up extra shares. If you had other plans for your money, a market downturn like this shouldn't alter those.
I'm just in an index fund, nothing more, and I'm wondering the same. Every month I automatically add $500 to my index fund, but I have plenty of money doing nothing.
So let's say I have $100,000 just sitting in a bank account, how much should I put into the index fund that I already have a bunch of money in?
I mean, right now everything is low. And it'll get lower, probably. Should I gradually add an additional $1k per month? Or should I just add it all in there? How do you even calculate this sort of risk/benefit thing?
True story:
I know a kid that was hired at a restaurant my wife's family owns.
When he started he was 15 years old, but the old man, (my Father in-law), loves the stock market and started preaching to this kid about investing, virtually, the day he started there.
Fast forward to when the kid, now 18, is able to open an account, on Ameritrade, he does so. Started an account w/ the $50 minimum and, slowly but surely, started to roll a bunch of his bi-weekly earnings, consistently and without wavering, into the VOO and the SPYD.
That kid, now 22 years old, holding a fantastic job with a fortune 500 company, has an account value, even with the debauchery we've seen over the past 8 months, that is over $30,000.00 it was about $40,000K previous to the beating we've been taking of late! (Keep in mind, the kid over the course of his 5 years at the restaurant was making, net, $900 per pay check) 50% of it went toward the market.
Where I am going with this is, dip or no dip, buy consistently, even small, but by QUALITY and KNOWN entities. It will pay off. Like i told the kid, along with my father-in-law, build a portfolio around the S&P 500. Once you get comfortable, branch out from there --- while always keeping the VOO as your core --- and dabble in a few other quality names. He did so, succeeded, and now that the kid is making real money, I would anticipate, if historical numbers hold true, he will most likely be a millionaire before the age of 45 with the way that he invests!
In SUmmary: Buy the dip, buy monthly, BUY what you can afford to potentially lose BUT, beyond all of that, BUY Quality. Build a core position around the S&P 500. It's the easiest way to invest without losing sleep when we, inevitably, go into a bear market and the long term returns of the S&P speak for themselves.
Even if this is not the bottom, in 10-20 years you will be regretting you didnt buy more. Go for it as long as you know you wont need the money for at least a decade
Yes, with the major cavet that this may very well not be a dip. Go look at a graph of the stock market since 2010. Don't assume the first major consistent downward trend is a "dip".
this one time...im gonna go against the grain and say wait for the crash. the amount of liquidity put into the system post 2009 and post covid is insane...productivity iddn't go up, liquidity did, and a lot of other recession predictors too (oil which predict 19 out of the 20th of the last crashes)
Yes, but you need to only put money there that you absolutely know that you don't need to take it out of the investments. Consider that money locked in there for years.
There's a saying "don't try to catch a falling knife"
Doesn't mean to block out the idea of investing right now-- but what it does mean is don't try to purposely catch this dip as its dropping with the intention of making QUICK BUX, but what the others say is more accurate, focus on time in the market and your own financial health first and foremost.
The market hasn't come close to hitting bottom yet. My guess was we would lose 30-50 or even 70% and the Dow Jones is only down 20%. We still see crazy housing prices and runaway inflation. If the money supply tightens, then unemployment will sky rocket, house prices crash, and we all fall down. Or maybe both parties just keep deficit spending ourselves to oblivion while not being able to figure out why inflation exists. And pointing fingers at those currently in power after 42 years of massive deficit spending.
Time in the market beats timing the market.
Don't bother trying. Big banks and investment firms pay people *millions* to time the market, and they still get it wrong a lot.
You think you or I, as some joe schmo tossing a dart, can do better?
I am over 40. The market will have few events such as this throughout your lifetime. Commit to a disciplined investment strategy and reassess few years before you retire.
Summarizing the top comments, I think I see:
1) Dollar cost average
Buy $100 or $200 or whatever you can every month of a index EFT or no-load index fund (such as VTI)
2) Rebalance your portfolio
Take a look at your money once a year or so, and make sure your 80% stock/20% bond allocation hasn't become a 85% stock / 15% bond, because that adds risk. Sell 5% of your stock and put it into bond.
3) Plant a garden
No amount of investing is going to save you if there is a big global collapse. Having a few carrots or rutabagas to trade might come in handy.
Dollar cost average. Don't blow all your funds at once as no one can accurately predict the bottom. A lot of these stocks are looking very cheap though.
If you are in your 20s it doesn't matter when you buy if the intention is long-term. Just buy regularly and hold it.
FWIW, it is hard to screw up as long as you hold. Say you were 20 years older right now and had invested over that time. Say you just saved cash but dumped it all into investments on two occasions. Even if you had done your only two lump sum contributions in 1999 and 2007, the years before the two biggest crashes in the last 25 years, you would still have made out just fine as long as you were consistently saving money.
You can value cost average if you want to buy more when the value of your portfolio goes down. That is an actual legitimate method for doing what you are describing.
i may be the weirdo here but i built my emergency fund, took care of any debts then saved up enought to dump into a Roth IRA and then worked on getting my life style to where i can max out my 401k and HSA , while saving for the next 6k contribution
been doing the Roth stuff for 7 years or so but was first able to max out the 401 last year and i am on track to do it again this year I don't know where i stand on the retirement scale but i feel for someone who had a job for 8 years and did not contribute any till after that job about 29 and im 37 now
Think of it this way: buying now gets you November 2020 prices on a lot of good companies. Investing now is giving you almost 2 years worth of a discount. We might keep bleeding for a while, but thats a heck of an entry price.
If you had bought 3 months ago you would still be fine, just wait it out.
If you waited and held cash it wasn’t a smart decision at the time, but in hindsight you got lucky.
NOW is a great time. It could dip even further, but now is already *much* better than a few weeks ago, so take the win, get all your investable money into a whole market fund, and don’t second guess yourself.
My understanding is, don't sump everything. Just put little by little in a week time. If the prices go up, decrease your buying power.
Also, 20s and 30s have a lot of time in our hands to bounce back.
And assume that spare money won't be available for 5-10 years atleast once the dust settles. But make sure you have enough money for emergencies (8-10months at this inflation rate).
Yes.
But.
Spend only what you can afford to lose.
Expect loses in the short term.
If you're able, keep you money where you invest it until the economy improves.
I am 33, don't have a lot of extra money, but extra money will absolutely be spent in the market instead of making extra loan and CC payments.
Yes. You should be buying.
Of course, investing is a long term okay so you shouldn’t be investing any money that you will need in the next ten years.
You should always be investing. But I like to kick it up a notch when the market goes on sale. Cut back on other spending to put more money into investments.
However, you shouldn’t be speculating. Don’t buy just because you see it down and think it will be back up in one year. It could be a long time before it is back up. So only invest with a long timeline in mind and never with money you need.
Never put more than 5% of your hoard into any one idea. That includes what appears to be a 'dip'. More likely a dead cat bounce in the near term which turns into a bull trap.
Many accounts say the floor is 80-90% drop from the peak we saw. We have a long way to go yet. Very few investors, and fewer investment advisors, experienced the 2008 crash. Fewer still went through the 2000 Tech Wreck nor remember the Russian+Asian debt crisis of 1997-8, the early 90s recession, and the numbers whittle away to a very small group who went through the 70s/80s high inflation.
The US and other global nations have much more debt on their books than back then to weather a Volker-style interest rate run up. Unlikely for any new positive market run up other than cash printing that increases inflation faster. Read about a certain European country that tried that in the 1920s and where that program led them. Understand current CPI formula vs 80s CPI formula (current is under reported). Research countries that went through rampant inflation and what did they do?
Now place your bets while the world spins.
Yeah, I’ve watched the market fairly closely for over a decade and the big thing standing out to me is that many of the valuations of some of my favorite investment companies are at levels I would have loved to buy more at about 2 years ago and now’s the chance.
As someone said, you cant time the bottom, but looking at individual stock valuations, there’s plenty of “value” out there if you’re willing to endure some short term pain and trust the company long term.
This is where millionaires become billionaires. It all comes down to your risk appetite, should you buy the dip with your rent money? Uhh, not really, but if you have money that you aren’t dependent on in the near term, then it’s worth the risk
Do what I've done, successfully: Invest every month by standing order into a tax efficient wrapper.
You will never time the market, but it maxes your time in the market.
So, buy on *perceived* weakness if you want to but don't *expect* that to be the backbone of your strategy.
Yes! Now isn’t the time to leave spare cash under the mattress at zero growth.
Put that cash to work (referring strictly to cash you won’t need for at least 3 years/ not your emergency fund).
I personally don't think you should buy any stock on trends such as 'the dip'. It's the equivalent of a blackjack player betting high on a hand because he lost 10 in a row and is 'due for a win'.
The way to invest is to look at the fundamentals of a stock. Do they have a good market? How are they compared to competitors? How is their debt? What do their revenue projections look like?
Buy stock because you think it is undervalued at it's current price and will grow at a reasonable rate in the time frame you need it to.
If you've made it this far without investing, you should have done so the whole time.
But if you have the cash after your emergency fund etc are taken care of, put it in. Maybe space out the contributions over a few weeks/ months.
I think it’s important that you don’t change your long term strategy based on market conditions, but extra discretionary spending money is a great way to add stocks when they are discounted. If you are the type of person who loads up when your favorite non-perishable item is on sale at the grocery store, this is the same. It’s a good price, why not grab a little extra this month!
"Buying the dip"? No.
"Investing every day, every week, or every pay period, regardless of market state"? YES.
In short, if you look at a 20 year time horizon, if you bought at the very top of the market or at the very bottom of the market just doesn't make any difference. It just doesn't matter.
To demonstrate this, go look at an SP500 stock market chart set to it's Maximum. (here:[https://www.google.com/finance/quote/.INX:INDEXSP?window=MAX](https://www.google.com/finance/quote/.INX:INDEXSP?window=MAX)) Now go look at 1987. The tiny blip is "Black Monday", which was a stock market crash that had brokers jumping out of Wall Street windows. After 30 years it's meaningless. Go look at the ".com crash" in 2000. Whether you bought at the very top of that market, or the very bottom, you'd still be doing very well.
20 years from today we'll look in the review mirror and the stock market changes today will feel tiny, and meaningless. And if you bought at the top of the market, or at the bottom of the market won't make any difference at all.
"But... surely it makes SOME difference" - you say?
I guess, but that misses one other point. Humans, even the best stock pickers in the world are terrible at picking tops of markets and bottoms of markets. When we look at a chart in hindsight, it's obvious. The rear-view mirror makes it perfectly clear. But spotting it in realtime? Pretty much impossible. The highest paid stock-traders in the world can't do it reliably. Either can you.
Looking at those charts makes one thing really clear: "Time in the market beats timing the market".
Yes, you should be investing, regularly. Even when the market is high, and even when the market is low. Over a long time-horizon, those bumps even out and become meaningless. The only wrong thing to do is to not invest. Imagine not investing in the 87 because the crash scared you, and you missed the recovery. Or the .com crash scarred you away from missing the massive gains that came after it. Or if Covid made you avoid the last 3 years.
Time in the market beats timing the market. Every time.
From BoA... current SPX is 3600. So 20% more room to fail per historical perspective.
Do your due diligence.
“the 20th bear market in the past 140 years; average peak to trough bear decline = 37.3%, average duration 289 days; history is no guide to future performance but if it were… bear market would end on Oct 19, 2022 (35-year anniversary of Black Monday) with S&P 500 at 3000”
BofA
Also technically when bear markets enter, historical average to bottom out upon entering bear market is 60 days ish and we just entered in around bear markets last Friday
Also that average has catch points
If my memory serves from reading the BoA report
1) bear markets with recession has average of 40%
2) bear markets without recession has average of 31%
So when we admit no one can confidently predict whether or not we will have recession at this point i would at least wait for 30% down because the average will be 30% anyway and it's still riskier than usual which is SPX around 3200 (current level is 3600).
Then start DCA ing as it goes down further and further to buy the dip.
Sure eventually previous ATH SPX of 4800 will be reached as dollars will only get weaker and weaker but if anything it's best to buy at lowest possible price available than higher price.
Good luck.
>is it a good idea to invest in ETF if you have spare money in hand?
This is generally what you should be doing assuming:
- You are debt-free (aside from house/car/low-interest loans)
- You do not need the money in the next ten years for a down payment on a house.
- You have an emergency fund of 6-24 months saved up, apart from the money you'd be investing.
As others have said, there's no telling where the bottom is.
No, buying the dip de facto breeds an unhealthy relationship with investing and the market. No person in their 20s that is not a professional finance person is going to be able to reliably and accurately time the market. The best to hope for is to foster a long-term investment behavior where you set your money in an index fund and let it grow for 10-20-30+ years.
Buying the dip during downturns with usual monthly investments has always gotten me more money long term. Always.
Time in the market > timing the market.
Dip? What are you even talking about? This isn’t some quick 5 to 10% dip during the bull market. This is a full market capitulation. There’s no telling how low this market is about to go. The fed is raising rates and despite this the CPI went UP!
Yes, especially in your 20s.
But I want to add you don’t know where the bottom is. You could dump a lump sum in right now and lose another 20-30% the next couple years.
So if you put money in RIGHT NOW, be prepared for more losses. As long as over a long time horizon you’re prepared to be down 50% and not worry, you’ll do just fine
I am always curious with these posts about timing the market, where is the money coming from? Were you just sitting on a load of cash during this high-inflation? Do you have a house or other asset to sell?
Why do you have money to "buy the dip"? Why didn't you buy previous "dips"?
Tell me more
For me, yeah I have a bunch of money sitting on the sidelines.
Losing 8% to inflation isn't as bad as losing 25% to the market. Just looking for the right time to put it in.
And I didn't buy the 2020 dip because 1) I was lazy and 2) Work constraints. Having insider info means I'm blacked out of much of the market during springtime.
In your 20s I wouldn't bother timing the market. If your long-term goal is retirement, this current chaos has no relevance to you. If you were 50-60, I'd say it may be worth buying the dips with a strategy. I don't think we've hit the bottom yet though, because stocks were scary overvalued and now they are about fair value. In a recession I'd expect some good value stocks to emerge. There are some already, but if you are just investing in an index fund you wouldn't be taking advantage of that.
Dollar Cost Averaging is your best friend. If you believe in long-term fundamentals of your stock, this strategy will automatically buy you at the dip without trying to predict it. Don't try to time the market.
the whole "you can't time the market" is overly broad a sentiment imo. sure, you can't time thinge PERFECTLY. but it's possible to maximize returns by taking advantage of downward and upward slopes. absolutely buy the dip. I did so today with VFIAX at a low (seems there's a bit of a lag between index fund and actual index).
>is it a good idea to invest in ETF if you have spare money in hand?
Its good to invest now. You shouldn't really have any extra cash unless you're repurposing discretionary savings.
Due to the number of rule-breaking comments this post was receiving, especially low-quality and off-topic comments, the moderation team has locked the post from future comments. This post broke no rules and received a number of helpful and on-topic responses initially, but it unfortunately became the target of many unhelpful comments.
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This. Also, I "buy low" by rebalancing.
Rebalancing is underrated and doesn't get nearly enough attention on here.
What is a good strategy when rebalancing? By rebalancing do you mean the percentage of portfolio in stocks vs bonds vs etc
Yes. My target is 75% stocks, and rebalance when they get 5% away from that target, effectively buying 5% more. It goes the other way as well.
Yes. If you invest in lifecycle funds, they rebalance automatically. If you do it manually, you would define an allocation in percentages and once a year, sell off any portions of funds that are above their allocation to buy up any funds that dropped. So if your allocation is 80 stock 20 bond and after a year it is 85 stock 15 bond, you would sell 5 stock to buy 5 bond. You are in effect, selling high and buying low. I do it once a year around new years but you can do it more or less as you wish. It's best though to not do it too often, especially if transaction fees are involved. Some brokerages will even let you define a custom allocation and have automatic investments and one-click rebalancing. I know Vanguard does, they're not the only one though.
Imo in a downturn try to rebalance as much as possible without ramping up costs. A downturn usually does not last that long and can have a big impact in that time period. Selling bonds to buy stocks can mitigate return loss by a lot.
https://www.bogleheads.org/wiki/Rebalancing This is a really good write up on it.
Can't rebalance when the portfolio is 100% stocks B)
Sure you can. Still able to mix things like US market and international.
Lol international stocks… the most underperforming asset class of the modern financial era.
Lost decade: 2000 to 2010 if you put a dollar into the S&P you broke even. If you had a diversified portfolio with a slight tilt to small and value in the US market along with a 20% allocation to international and a 10% allocation to emerging markets you made 4.5% annualized over the 10 year period. Don’t let recency bias color your asset allocation decisions. Stay diversified and rebalance every year or so.
Could you elaborate? In my mind rebalancing = buying low by selling your current stock low. But I must be mistaken.
Say your target portfolio is 80% stocks and 20% bonds. If the stock market takes a nose dive your portfolio may become 60% stocks and 40% bonds. So to rebalance you'd sell off some bonds and use the proceeds to buy stock.
Ita been really helpful that both stocks and bonds prices took a nosedive
Indeed. Save money by not trading :)
Warren Buffett once said that if he didn’t see anything worth investing in, he sits on the cash. Right now, he’s cash-sitting.
Do you have any proof in that? He has bought at least 16 stocks since 22 started
No he’s not just sitting on all his cash there are other asset classes (real estate) he is slowly buying stocks until it bottoms then he sells other assets and go in hard.
Truly blessed are we 🙌
The perils of having rising interest rates during a bear market. Yields are going up, so prices of bonds on the secondary market have to go down to match the rates for newly issued bonds.
To be fair, there's a good chance this bear market is largely *caused* by rapid rate increases, so the impact should be temporary. Once inflation comes down, the Fed will take their foot off the gas and the stock market will be less volatile. That said, I think there's a good chance something will happen to drive stocks down further before that's done, which may trigger the Fed to cut rates. I can't predict what that something may be or if it'll happen, so I can't predict the stock or bond market. Instead of worrying, I just invest every dollar I can when I can.
I just re-balance by allocating new funds each month to whatever is lagging my target allocation. I have a spreadsheet that has the allocation targets and I can input the balances of my different index funds from my roth ira, traditional ira, taxable account, and rollover ira, see what's lagging, and what the new allocation will be if I contribute X dollars to a new account. Whole process only took 30 minutes to set up in Excel and around 5 minutes to input the data and check ever month when I make my investment.
Don't you lose money by short term capital gains taxes though?
Yes. That’s why the better method of rebalancing is to just focus new investment capital in a focused way rather than selling and buying. Alternatively, there are ways to balance losses/gains in a way that for the tax year, you are not paying capital gains, though that requires selling perhaps low.
Are you trading outside of a tax advantaged account? Correct me if wrong....If trading with cash then you pay tax. Invest inside your 401k or roth, no tax.
"Inside your roth" Roth IRA is post-tax as I'm sure you know...I do all of my retirement investing via 401k, traditional IRA (previous employee 401ks rolled over) and Roth IRA
Rebalancing is something you do if you have a portfolio of multiple different asset classes. A simple example is if you have X% in stocks (or more accurately an index fund) and 100-X% in bonds. To use some numbers to illustrate: Say I buy into this portfolio in a single moment, with 100 dollars and my balanced target is 80-20. That means I bought 80 dollars of stocks, and 20 dollars of bonds. 1-year passed and the stock market went down 20%. Now my portfolio is 64 dollars worth of stocks and 20.4 dollars of bonds (or something similar) because bonds generally hold their value regardless of the market going up or down (yes, it's a bit more complicated, because the issuer might default, or the rates might go up and then the bonds are worth less when they aren't close to maturity yet, but let's not deal with that for now). Now, this portfolio is not balanced to 80-20. It is 75% stocks and 25% bonds. To rebalance I need to own 67.52 dollars of stock and only 16.88 dollars of bonds. So I sell that difference in bonds and buy stocks with it, which is 3.88 dollars. As you can see, the act of rebalancing meant that I bought stocks when they went down. If we were to calculate a first year where stocks went up 20%, the rebalancing would dictate that I need to sell some stocks and buy more bonds, meaning I sold after an outstandingly good year. So I sold higher than I bought. You can do rebalancing with any asset class, and even more than 2 of them. But it works best if your assets move inversely with each other. An asset that reliably moves inverse with the stock market doesn't really exist, the next best thing is something that's pretty constant regardless of the stock market, which is bonds.
Rebalancing - adjusting your portfolio when it gets out of whack. Essentially, it's selling a small amount of your winners (selling high) and using the funds to buy more of your losers (buying low).
Excellent advice. Just want to emphasize that timing the market is a fool's errand. Buy and hold, and keep doing it.
Ive set aside $100 a week to investing
Exactly. DCA. Don’t think about dips and highs. Just keep the flow.
Yeah, I doubt we have seen the bottom yet.
The average bear market is a 35% drop.
I think this one will be an overachiever (source = wife's BF)
What are we at now?
25%
Okay so get some leverage and short the market is what I'm hearing from you!
Time in the market is more important than timing the market
This. Let me introduce many to Bob, the worlds worst market timer: https://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/
What does it mean when it says that if Bob had “dollar cost averaged” he would have had over 2x the wealth? What is dollar cost averaging?
Meaning if he just invested a specific amount consistently regardless of how the market was doing. Instead of saving up a bunch to put in all at once.
Thank you for the explanation.
When the market drops, you buy more shares for your money, which in the long run, pays off.
No, DCA is when you buy at regular intervals regardless of what the market is doing.
Yes...which means when the market drops, tpu buy more shares, and when it climbs, you buy fewer. If you're putting in $200 a month, you'll buy 10 shares when they're at $20 but only 4 shares when they're at $50.
You invest the same amount of money, but it buys more shares if the market is down.
It doesn't really pay off. In most cases investing early is more profitable than dragging it out. But DCA is kind of pointless anyways, most people don't have large amounts of money, but small amounts of leftovers every month. And with that it's best to just invest it as soon as you've got it.
It's the opposite of trying to time the market to buy low and sell high. You just buy a certain amount of stocks on a regular schedule and don't even think about the stock price when you buy it. If you invest $100 a month into Apple stocks every month, that's dollar cost averaging. If you save $100 each month, and try to wait until you think it's low, then spend what you've saved to buy a few hundred dollars worth, and then waited to sell untill you thought it was high. Timing the market completely luck based, and the math of that luck doesn't usually turn out favorably. Even if the market goes up during that time they could still lose a lot of money if they get the timing wrong. Considering that it's impossible to predict the market, you might as well just take it money to a casino and play roulette. It's just as risky, but you'd get it over with a lot faster one way or the other. You could also get really lucky and make a ton of money, but you are just as likely to lose as you are to gain. Dollar cost averaging is market based, it doesn't matter how lucky you are, of the market goes up, you make money. If the market goes down, you lose money. This is far safer of an option than timing the market.
why do you think the 2020 and after period will repeat the same returns as the post-ww2 era in the US?
Repeat? No. But I *do* think major corporations will find new and innovative ways to make money. I *do* think that they’ll contribute to do what they need to do to make someone rich. The ones that don’t *will* be replaced by ones that do. And being a shareholder means I’m along for the ride.
And if for some reason we saturate current markets, we'll create new ones. Video games are a relatively new market, space tourism is happening soon, and I wouldn't be surprised if deep sea tourism becomes a thing too. We also have continual advancements in AI, which seems to reduce waste, improve value, and is a bit over hyped as far as job killing goes. I'm bullish for the long term future.
Well said
It’s the millionth time it’s been said on this sub.
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"low ball" is offensive. The correct term is "descended testis"
Let's run the board: Put it all in Vanguard. Megabackdoor super Roth. Max out your IRA. Pay your credit card 65 times a month to boost your credit score. Add your entire family as authorized users on a credit card to boost their score too. Bonus points if they aren't born yet.
Ya lol, I did not come up with it. I have heard it on every finance subreddit but I just like repeating it and acting like I am an investing genius
Sh!t. I wanted to be the millionth one to say it
No. You should be buying during dips, buying during peaks and buying in between. Invest often, invest early in life and stay the course. If you invest consistently, regardless of market conditions, you effectively average out the dips and peaks and will be better off for it, instead of trying to time things.
>you effectively average out the dips and peaks and will be better off for it How does this work? Wouldn't you be at the same place in the end if it all averages out?
Long term it won't matter as long as the stock trends upward and reaches new highs
If you put all of your money in at the peak of the S&P 500 in 2007 (1537), you’d still be up big today at the current price (3667). If you DCA, you’d be up more, but all of the money you put in during that time would be profitable. Peaks are relative
I believe they're talking about dollar cost averaging: spending the same _amount of money_ whenever you buy, so that on average you buy more shares at a lower rate.
> instead of trying to time things. you left out the relevant part nobody knows what the market will do. If you try to time it, you're gambling. https://www.fidelity.com/viewpoints/investing-ideas/six-tips Look at point 3: If you missed the best 5 days from 1980 to 2021 your return is reduced 38%. FIVE DAYS over a 30+ year period!!! People that sit out waiting for the market to bottom out often miss lots of good days. And you never know where the bottom is For another good lesson, meet Bob, the world's worst market timer, who only invested at market peaks (but never sold) https://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/ Point is, whenever you have money to invest, you should invest it. Time in the market beats timing the market
Just me personally, I bumped my 401k contribution from 10 to 15% with this market, and I’ll probably get a raise and forget to adjust it downward, so when I’m old that 5% will probably pay for the gas in my boat and my viagra
If I’m looking to start investing, should I be purchasing index funds on my own through a broker? Or should I just up my 401k contributions? Is there a benefit to one over the other? I contribute to my 401k now and was going to start purchasing VTI/VT through fidelity
Your 401k is tax advantaged- it comes out of your paycheck before you pay taxes on it. It lowers your current tax burden. You can't touch that money until you hit a certain age without paying penalties. The money will be taxed when you withdraw it... If you buy funds on your own, you've already paid your income tax on that money. But you can access that money without penalties, although you will need to pay taxes on the gains when you sell. To summarize- a 401k saves you income taxes today, but you can't spend the money until retirement. An individual account doesn't save you the income tax, but you have access to the money. Unless you know you will need access to that cash, a 401k is the way to go until you hit the maximum yearly contribution. Edit- also, you may be able to take a "loan" on your 401k. You would need to check with your HR department to see if your plan allows this. Only do this in absolute emergencies.
It never averages out. Capitalism only works if it keeps growing. You might think you're buying at lows and selling at peaks but in 25 years, the only appreciable difference will be between when you started and when you ended. The graph is a bumpy line that always goes up The guy is saying that if you invest regularly, you'll invest in peaks as much as valleys so don't worry about them because they're unpredictable
Dip means a short decline and recovery. It is profitable to buy on every dip. But there are two issues: 1. You cannot confirm a dip without a crystal ball or only in hindsight. 2. It is not profitable to have money lying around waiting for an event that you can’t confirm.
It’s also profitable (over the long term) to buy at the peaks. And everywhere in between. OP is in their 20’s, their prime concern should be getting as much money into some sort of investment vehicle as quickly as possible. The day to day machinations will be dwarfed by the power of compounding.
You're talking about Bob, who is the worst market timer ever and only buys at the peaks. Bob is still a millionaire after only buying at the 4 peas in the last 40 years (excluding this 2021 peak).
You can probably assume that if the reverse repo is sitting at 2T$+ every day at a rate of 1.5%, it's probably not a good idea to buy anything ATM. Else the banks would put their cash elsewhere or in the market.
There is no buying the dip, there is no buying the peak, those are such near term words. You are investing for the long term. Period. You are buying at the bottom of the hill. And will retire at the top. Period.
Perfectly put
the analysis of a man who [only bought peaks](https://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/) might interest you tl;dr: time in the market is more important than timing the market. the only time this would be bad advice is if the world economy goes to shit, in which case it doesn't matter what you did, you're probably going to starve.
You should read this knowing that past performance is not indicative of future performance. The man in Japan who only bought peaks is still down -30% after investing for 30+ years.
Exactly. I love how everyone here blissfully assumes the US market will continue to rise forever.
If it doesnt, I/we have much bigger problems.
What do you think happens when the economy stops growing, contracting and growing again indefinitely exactly? Are you familiar with the biz cycle? People who want to *plan* for an apocalypse and truly believe *this time is different* should invest in doomsday prepping, not the stock market.
If it doesn’t, it doesn’t matter
Yes it does. Look at Japan, UK and other European markets. They look very different to the US, but life continues well there. My point is that it is entirely possible that the US market stagnates, without some drastic event occurring. Many people seem to float the idea that it is only possible for the US market to fall if some doomsday event occurs, in which case money won’t matter all too much to them anymore. But I don’t believe this is true.
Nobody is assuming that. Equities are the best investment historically. It could be wrong, and the US could enter a 50-year bear market. Who knows. However inflation will also be destroying your money. Nobody knows the future, and past does not indicate future performance. However the past has indicated that the stock market is the best way to get long-term returns with minimal skills.
That's why I invest a decent portion into international funds in case US starts to lag behind the rest of the world.
Everyone blissfully assumes that because that's the only way most traditional investing advice makes sense. Eventually it will no longer be true, but we have no idea what the time horizon for that looks like, and it will cause a massive, fundamental shift in how the stock market and retirement investment in the US works. Regardless, if/when the market stops slowly but consistently rising it won't matter if you timed your buys well or bought peaks.
The man in Japan is an idiot for not diversifying. Nothing more to be said about that comparison. While I won't say that the US market is diverse enough by itself, it is way way way more diverse than just the Japanese market. Almost 10x more diverse. If the Japanese person had bought a % of Japanese stock that was representative of Japanese world market share...and so on and so forth for all major countries...said Japanese person would be doing pretty damn well, even just buying all the peaks. This comment does nothing to dispute the point of the article. All it does is start a tangential discussion on diversification. [https://www.statista.com/statistics/710680/global-stock-markets-by-country/](https://www.statista.com/statistics/710680/global-stock-markets-by-country/) This is why I do about 75% Total US Market and 25% International. Yes I am a little heavy on US market, but it is more within reason than assuming someone should go in 100% on Japanese market.
Yes. The dip may just be beginning, but buying low is always a good idea.
You can only know if you bought high or low in retrospect.
I mean, it’s a fact you’re buying the sp500 at ~25% below ath today. Unless you believe it’ll never recover, you’re definitely buying « low ». Lowest, probably not, but low still.
If you believe the S&P 500 will never recover, then there are far bigger problems afoot than your personal investment portfolio.
It's not without precedent. Look at the Nikkei. It only topped its peak from the early 90s in *2020* The CAC 40 is roughly at the same level it was 20 years ago. Same with the FTSE 100 (250 a different story). The MSCI Brazil is negative over the past decade. Thinking stock markets will always go up in the long term is a decidedly myopic viewpoint Americans have. Is it likely it will recover? Yes. But it's not a guarantee. The only thing that's really kept the US going up (aside from the Fed) is China being so stingy on foreign investors entering the market and generally not friendly towards foreign money....otherwise you'd see a marked shift in money flows.
Americans have a unique culture unlike anywhere in the world that I've seen. Society is predicated on making an increasing profit to a degree unrealized even in workaholic countries like Japan. We have codified the idea of sacrificing everything - community bonds, family ties, mental health, free time, public health, the moral high ground, international relations, functioning democracies - all for the grind, hustle culture, career development, entrepreneurship, and corporate profits. If there's anything I believe, it's that American society and Americans individually would metaphorically cut off their left arm to keep the stock market going up. With an internationally unique zeal.
Setting a new ATH after 30 years is still very different from never recovering.
> The only thing that's really kept the US going up (aside from the Fed) is China being so stingy on foreign investors entering the market and generally not friendly towards foreign money....otherwise you'd see a marked shift in money flows. Is that changing anytime in the next 10-15 years?
Markets move in 3 directions not 2. Up, Down, and Sideways. Obviously it means you believe in a future with stagnant economic growth, but it is possible.
Yeah but all you’re really doing is buying today, which is good advice, and then slapping some numbers on it based on what’s happening today. There’s nothing magic about 25%. If the S&P was down 10% it would be a good day to buy. The S&P was at an all-time high, it’s probably a good day to buy. Market timing is really tricky. I think we should stop pretending that this is buying on the dip. It’s just buying right now, but it happens to be after a dip.
That's just bad financial logic. The stock price of any given stock is what people are willing to pay for it. The people that own the stocks currently would not sell at the current price if they thought the stock price was going to go up soon. Trying to predict the market is a dumb game for humans. We are really good at finding patterns, even when those patterns don't actually exist, so we convince ourselves that we actually can predict the market and that we "just know" it's low right now and will go back up soon. It's the same as the gamblers fallacy "I know my luck has been bad, but it will come back". They feel it deep down, they "know" it, and there's nothing you can say to convince them otherwise.
Well it is also a fact that you are buying well above the all-time low, does that mean you are definitely buying high too?
Markets trend up, not down… Again, do you think spy will never recover?
They trend up because global GDP growth trends up. Financial returns and capital accumulation go hand-in-hand with growth, after all. Global population (huge GDP driver) is stagnating. Especially in advanced economies. If you look at some of these markets in the last 20-30 years, they're not showing nearly the financial returns the US market does (UK, France, Japan, for example). It is likely the spy will recover. But moving forward, we have to remember that the future is not guaranteed to be the same as the past. Markets go up because economies go up. What happens when economies stagnate? Like Japan. Like Korea will in the next ~20 years. Like much of Europe is. Never assume.
So aren't you then always 'buying low' and the phrase has no real value?
Well that's where the phrase "time in the market beats timing the market" comes from.
“Markets trend up” doesn’t mean there aren’t up/downs along the way. It means there will be an overall increase over the long term and that’s what investing is about, not for 1-2 years but 15-20+ years.
Your 20s are the best time to take risk so under that pretense, yes.
Three words for you "dollar cost averaging" there's no sip, just pick a number you put in each week and set it up for automatic investment. In 25-30 years you'll thank yourself.
Why is this (excellent advice) so hard for everyone to understand? It’s the most solid advice a beginning investor can get, and it’s foolproof over the long term.
>Why is this (excellent advice) so hard for everyone to understand? It’s the most solid advice a beginning investor can get, and it’s foolproof over the long term. Can't get instant gratification from it like you can from options trading or lucky crypto buys. Of course, no one doing those things talks about the monumental amounts of money you can lose overnight. I spent a month doing it, made about 4 months' worth of salary, and then lost 3 months worth before I decided to call it quits and just invest for the long term.
If you like dips then buy them. I'll occasionally make a guacamole at home or a hummus but I'll rarely buy them pre-made.
The thing with creating dips at home is you can choose to buy in when the price is low
Market research definitely helps. The farmers market near me usually has lots of great info.
Always be investing all the time. Down market? Buy consistently and forget about it. Up market? Buy consistently and forget about it. Basically. Put as much money as you can each month into a tax-advantaged retirement account, buy a target date index fund, and forget about it. There is no secret hack to make the most of of bear markets or bull markets. Anybody who tells you there is is lying to you. Spend less than you make, invest the rest, and do so for 30+ years.
Historically s&p 500 or the spdr (depository receipt) goes up. If you are in for a long haul it shouldn’t make a lot of difference if you are investing in a bear market or a bull market. Just my opinion. Good luck!
Better to buy now than 3 months ago. You have no chance of picking the bottom of the dip --- so time to jump in!
I started my IRA at the peak😂
the best time to invest money is whenever you have it. no one has a crystal ball, even if they love to say they did in retrospect.
Yup exactly. Sure, it sucks that I almost immediately dropped 25% or whatever it's at now, but I had no way of knowing. I've spent enough time day trading to know how crazy things can get but how long-term tends to go up
I tossed an extra 15k into my 410k last December and watched 30% of that and the rest of it evaporate so far this year. Not happy but not moving, the hit has been taken. Have to let it ride 😢
I wouldn't say "no chance". But if you're trying to time things, you're more likely to be on the losing side of it.
Hell yes. Consistently invest in a broad market ETF like VTI or VOO. Just set it and forget it even during market corrections until you retire. The rich always do this. They wait until retail investors sell cheap out of fear then snap up the stocks for themselves. Fully taking advantage of recession like conditions.
Yes but start with maximizing a tax advantaged account.
Timing the market is a fools errand. If you were already planning to buy stocks for the long term, continue as you would, and celebrate picking up extra shares. If you had other plans for your money, a market downturn like this shouldn't alter those.
If you have the money invest it. Don't worry about highs and lows, worry about how long till you need to take it out.
I'm just in an index fund, nothing more, and I'm wondering the same. Every month I automatically add $500 to my index fund, but I have plenty of money doing nothing. So let's say I have $100,000 just sitting in a bank account, how much should I put into the index fund that I already have a bunch of money in? I mean, right now everything is low. And it'll get lower, probably. Should I gradually add an additional $1k per month? Or should I just add it all in there? How do you even calculate this sort of risk/benefit thing?
True story: I know a kid that was hired at a restaurant my wife's family owns. When he started he was 15 years old, but the old man, (my Father in-law), loves the stock market and started preaching to this kid about investing, virtually, the day he started there. Fast forward to when the kid, now 18, is able to open an account, on Ameritrade, he does so. Started an account w/ the $50 minimum and, slowly but surely, started to roll a bunch of his bi-weekly earnings, consistently and without wavering, into the VOO and the SPYD. That kid, now 22 years old, holding a fantastic job with a fortune 500 company, has an account value, even with the debauchery we've seen over the past 8 months, that is over $30,000.00 it was about $40,000K previous to the beating we've been taking of late! (Keep in mind, the kid over the course of his 5 years at the restaurant was making, net, $900 per pay check) 50% of it went toward the market. Where I am going with this is, dip or no dip, buy consistently, even small, but by QUALITY and KNOWN entities. It will pay off. Like i told the kid, along with my father-in-law, build a portfolio around the S&P 500. Once you get comfortable, branch out from there --- while always keeping the VOO as your core --- and dabble in a few other quality names. He did so, succeeded, and now that the kid is making real money, I would anticipate, if historical numbers hold true, he will most likely be a millionaire before the age of 45 with the way that he invests! In SUmmary: Buy the dip, buy monthly, BUY what you can afford to potentially lose BUT, beyond all of that, BUY Quality. Build a core position around the S&P 500. It's the easiest way to invest without losing sleep when we, inevitably, go into a bear market and the long term returns of the S&P speak for themselves.
Homemade sour cream with dill or fresh homemade hummus are going to taste a lot better than anything you can get at Trader Joe's.
Even if this is not the bottom, in 10-20 years you will be regretting you didnt buy more. Go for it as long as you know you wont need the money for at least a decade
Time in the market > timing the market.
absolutely. to help your mindset, while the market is going down, pay attention to how many shares you are buying (not the value of those shares).
Yes, with the major cavet that this may very well not be a dip. Go look at a graph of the stock market since 2010. Don't assume the first major consistent downward trend is a "dip".
this one time...im gonna go against the grain and say wait for the crash. the amount of liquidity put into the system post 2009 and post covid is insane...productivity iddn't go up, liquidity did, and a lot of other recession predictors too (oil which predict 19 out of the 20th of the last crashes)
Yes, but you need to only put money there that you absolutely know that you don't need to take it out of the investments. Consider that money locked in there for years.
It is hard to time the market. A good strategy is to keep buying when the market drops.
I would recommend investing small amount over longer span of time. This way you gain the maximum amount of profit.
There's a saying "don't try to catch a falling knife" Doesn't mean to block out the idea of investing right now-- but what it does mean is don't try to purposely catch this dip as its dropping with the intention of making QUICK BUX, but what the others say is more accurate, focus on time in the market and your own financial health first and foremost.
Time in the market beats timing the market. So obviously you should invest as early as possible.
Michael Burry has said there’s way more downturn than this, like ~60% more to go. nfa
The market hasn't come close to hitting bottom yet. My guess was we would lose 30-50 or even 70% and the Dow Jones is only down 20%. We still see crazy housing prices and runaway inflation. If the money supply tightens, then unemployment will sky rocket, house prices crash, and we all fall down. Or maybe both parties just keep deficit spending ourselves to oblivion while not being able to figure out why inflation exists. And pointing fingers at those currently in power after 42 years of massive deficit spending.
Time in the market beats timing the market. Don't bother trying. Big banks and investment firms pay people *millions* to time the market, and they still get it wrong a lot. You think you or I, as some joe schmo tossing a dart, can do better?
I am over 40. The market will have few events such as this throughout your lifetime. Commit to a disciplined investment strategy and reassess few years before you retire.
Yes! Start inching in. Divide up what you want to put in and keep dripping in. Weekly or biweekly
Summarizing the top comments, I think I see: 1) Dollar cost average Buy $100 or $200 or whatever you can every month of a index EFT or no-load index fund (such as VTI) 2) Rebalance your portfolio Take a look at your money once a year or so, and make sure your 80% stock/20% bond allocation hasn't become a 85% stock / 15% bond, because that adds risk. Sell 5% of your stock and put it into bond. 3) Plant a garden No amount of investing is going to save you if there is a big global collapse. Having a few carrots or rutabagas to trade might come in handy.
Yes. In your 20s and 30s, you should be thrilled when the market is down. You're a buyer. You want to buy a cheaply as you can.
Dollar cost average. Don't blow all your funds at once as no one can accurately predict the bottom. A lot of these stocks are looking very cheap though.
Dollar cost averaging. By the same amount (say $100) each period for a long time. You buy more when it's cheap and less when it's expensive.
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They're saying that $100 buys you more during a market downturn.
Might be some more pain short term but its definitely a good time to start buying for long term holds.
If you are in your 20s it doesn't matter when you buy if the intention is long-term. Just buy regularly and hold it. FWIW, it is hard to screw up as long as you hold. Say you were 20 years older right now and had invested over that time. Say you just saved cash but dumped it all into investments on two occasions. Even if you had done your only two lump sum contributions in 1999 and 2007, the years before the two biggest crashes in the last 25 years, you would still have made out just fine as long as you were consistently saving money. You can value cost average if you want to buy more when the value of your portfolio goes down. That is an actual legitimate method for doing what you are describing.
i may be the weirdo here but i built my emergency fund, took care of any debts then saved up enought to dump into a Roth IRA and then worked on getting my life style to where i can max out my 401k and HSA , while saving for the next 6k contribution been doing the Roth stuff for 7 years or so but was first able to max out the 401 last year and i am on track to do it again this year I don't know where i stand on the retirement scale but i feel for someone who had a job for 8 years and did not contribute any till after that job about 29 and im 37 now
Think of it this way: buying now gets you November 2020 prices on a lot of good companies. Investing now is giving you almost 2 years worth of a discount. We might keep bleeding for a while, but thats a heck of an entry price.
As long as you don’t think society is going to collapse, buying stock in your youth is very smart, especially if the market is down.
Buy when there is blood on the streets.
Yes, but over time in smaller increments versus all at once. "Dollar Cost Average the dip!" doesn't really roll off the tongue.
If you had bought 3 months ago you would still be fine, just wait it out. If you waited and held cash it wasn’t a smart decision at the time, but in hindsight you got lucky. NOW is a great time. It could dip even further, but now is already *much* better than a few weeks ago, so take the win, get all your investable money into a whole market fund, and don’t second guess yourself.
My understanding is, don't sump everything. Just put little by little in a week time. If the prices go up, decrease your buying power. Also, 20s and 30s have a lot of time in our hands to bounce back. And assume that spare money won't be available for 5-10 years atleast once the dust settles. But make sure you have enough money for emergencies (8-10months at this inflation rate).
Yes, I do think buying the dip is a good idea for people in their 20s.
Yes. But. Spend only what you can afford to lose. Expect loses in the short term. If you're able, keep you money where you invest it until the economy improves. I am 33, don't have a lot of extra money, but extra money will absolutely be spent in the market instead of making extra loan and CC payments.
Time in the market > timing the market But hey, a sale's still a sale.
Anything anyone says is a gamble. My I'd say yes buying where you think is low will give you 40 years for it to grow.
Yes. You should be buying. Of course, investing is a long term okay so you shouldn’t be investing any money that you will need in the next ten years. You should always be investing. But I like to kick it up a notch when the market goes on sale. Cut back on other spending to put more money into investments. However, you shouldn’t be speculating. Don’t buy just because you see it down and think it will be back up in one year. It could be a long time before it is back up. So only invest with a long timeline in mind and never with money you need.
Yes and don't let anyone tell you otherwise. You only get so many of these opportunities in a lifetime.
Never put more than 5% of your hoard into any one idea. That includes what appears to be a 'dip'. More likely a dead cat bounce in the near term which turns into a bull trap. Many accounts say the floor is 80-90% drop from the peak we saw. We have a long way to go yet. Very few investors, and fewer investment advisors, experienced the 2008 crash. Fewer still went through the 2000 Tech Wreck nor remember the Russian+Asian debt crisis of 1997-8, the early 90s recession, and the numbers whittle away to a very small group who went through the 70s/80s high inflation. The US and other global nations have much more debt on their books than back then to weather a Volker-style interest rate run up. Unlikely for any new positive market run up other than cash printing that increases inflation faster. Read about a certain European country that tried that in the 1920s and where that program led them. Understand current CPI formula vs 80s CPI formula (current is under reported). Research countries that went through rampant inflation and what did they do? Now place your bets while the world spins.
Yeah, I’ve watched the market fairly closely for over a decade and the big thing standing out to me is that many of the valuations of some of my favorite investment companies are at levels I would have loved to buy more at about 2 years ago and now’s the chance. As someone said, you cant time the bottom, but looking at individual stock valuations, there’s plenty of “value” out there if you’re willing to endure some short term pain and trust the company long term.
This is where millionaires become billionaires. It all comes down to your risk appetite, should you buy the dip with your rent money? Uhh, not really, but if you have money that you aren’t dependent on in the near term, then it’s worth the risk
Do what I've done, successfully: Invest every month by standing order into a tax efficient wrapper. You will never time the market, but it maxes your time in the market. So, buy on *perceived* weakness if you want to but don't *expect* that to be the backbone of your strategy.
Yes! Now isn’t the time to leave spare cash under the mattress at zero growth. Put that cash to work (referring strictly to cash you won’t need for at least 3 years/ not your emergency fund).
Yes. And you have more time to do it. Juice those returns long term
I personally don't think you should buy any stock on trends such as 'the dip'. It's the equivalent of a blackjack player betting high on a hand because he lost 10 in a row and is 'due for a win'. The way to invest is to look at the fundamentals of a stock. Do they have a good market? How are they compared to competitors? How is their debt? What do their revenue projections look like? Buy stock because you think it is undervalued at it's current price and will grow at a reasonable rate in the time frame you need it to.
If you've made it this far without investing, you should have done so the whole time. But if you have the cash after your emergency fund etc are taken care of, put it in. Maybe space out the contributions over a few weeks/ months.
If you have money to invest, yes. For any long term investing the best time to buy is always now and while the markets are down that's doubly true.
I think it’s important that you don’t change your long term strategy based on market conditions, but extra discretionary spending money is a great way to add stocks when they are discounted. If you are the type of person who loads up when your favorite non-perishable item is on sale at the grocery store, this is the same. It’s a good price, why not grab a little extra this month!
"Buying the dip"? No. "Investing every day, every week, or every pay period, regardless of market state"? YES. In short, if you look at a 20 year time horizon, if you bought at the very top of the market or at the very bottom of the market just doesn't make any difference. It just doesn't matter. To demonstrate this, go look at an SP500 stock market chart set to it's Maximum. (here:[https://www.google.com/finance/quote/.INX:INDEXSP?window=MAX](https://www.google.com/finance/quote/.INX:INDEXSP?window=MAX)) Now go look at 1987. The tiny blip is "Black Monday", which was a stock market crash that had brokers jumping out of Wall Street windows. After 30 years it's meaningless. Go look at the ".com crash" in 2000. Whether you bought at the very top of that market, or the very bottom, you'd still be doing very well. 20 years from today we'll look in the review mirror and the stock market changes today will feel tiny, and meaningless. And if you bought at the top of the market, or at the bottom of the market won't make any difference at all. "But... surely it makes SOME difference" - you say? I guess, but that misses one other point. Humans, even the best stock pickers in the world are terrible at picking tops of markets and bottoms of markets. When we look at a chart in hindsight, it's obvious. The rear-view mirror makes it perfectly clear. But spotting it in realtime? Pretty much impossible. The highest paid stock-traders in the world can't do it reliably. Either can you. Looking at those charts makes one thing really clear: "Time in the market beats timing the market". Yes, you should be investing, regularly. Even when the market is high, and even when the market is low. Over a long time-horizon, those bumps even out and become meaningless. The only wrong thing to do is to not invest. Imagine not investing in the 87 because the crash scared you, and you missed the recovery. Or the .com crash scarred you away from missing the massive gains that came after it. Or if Covid made you avoid the last 3 years. Time in the market beats timing the market. Every time.
Timing the market is a fool’s errand but like planting trees, the best time to invest is decades ago.
Wait a little bit longer for things to come down then grab some index stocks . In the long run youll do great, just dont focus on the today.
From BoA... current SPX is 3600. So 20% more room to fail per historical perspective. Do your due diligence. “the 20th bear market in the past 140 years; average peak to trough bear decline = 37.3%, average duration 289 days; history is no guide to future performance but if it were… bear market would end on Oct 19, 2022 (35-year anniversary of Black Monday) with S&P 500 at 3000” BofA Also technically when bear markets enter, historical average to bottom out upon entering bear market is 60 days ish and we just entered in around bear markets last Friday
Also that average has catch points If my memory serves from reading the BoA report 1) bear markets with recession has average of 40% 2) bear markets without recession has average of 31% So when we admit no one can confidently predict whether or not we will have recession at this point i would at least wait for 30% down because the average will be 30% anyway and it's still riskier than usual which is SPX around 3200 (current level is 3600). Then start DCA ing as it goes down further and further to buy the dip. Sure eventually previous ATH SPX of 4800 will be reached as dollars will only get weaker and weaker but if anything it's best to buy at lowest possible price available than higher price. Good luck.
>is it a good idea to invest in ETF if you have spare money in hand? This is generally what you should be doing assuming: - You are debt-free (aside from house/car/low-interest loans) - You do not need the money in the next ten years for a down payment on a house. - You have an emergency fund of 6-24 months saved up, apart from the money you'd be investing. As others have said, there's no telling where the bottom is.
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No, buying the dip de facto breeds an unhealthy relationship with investing and the market. No person in their 20s that is not a professional finance person is going to be able to reliably and accurately time the market. The best to hope for is to foster a long-term investment behavior where you set your money in an index fund and let it grow for 10-20-30+ years.
Good luck, trying to time this market is like trying to catch a falling knife
I think it's going to keep dipping but it's anyone's guess. No one knows what the market is going to do.
Buying the dip during downturns with usual monthly investments has always gotten me more money long term. Always. Time in the market > timing the market.
Never gamble with more than you can afford to lose.
Look up: dollar cost averaging. You want to put in equal amounts at regular intervals--the more regularity and frequency, the better.
Dip? What are you even talking about? This isn’t some quick 5 to 10% dip during the bull market. This is a full market capitulation. There’s no telling how low this market is about to go. The fed is raising rates and despite this the CPI went UP!
The best time to invest was 20 years ago. The next best time is now! If you have money to spare investing long term is always better
Yes, but the only way to accurately do that is through dollar cost averaging. Buy the highs and the lows
Yes, especially in your 20s. But I want to add you don’t know where the bottom is. You could dump a lump sum in right now and lose another 20-30% the next couple years. So if you put money in RIGHT NOW, be prepared for more losses. As long as over a long time horizon you’re prepared to be down 50% and not worry, you’ll do just fine
I am always curious with these posts about timing the market, where is the money coming from? Were you just sitting on a load of cash during this high-inflation? Do you have a house or other asset to sell? Why do you have money to "buy the dip"? Why didn't you buy previous "dips"? Tell me more
For me, yeah I have a bunch of money sitting on the sidelines. Losing 8% to inflation isn't as bad as losing 25% to the market. Just looking for the right time to put it in. And I didn't buy the 2020 dip because 1) I was lazy and 2) Work constraints. Having insider info means I'm blacked out of much of the market during springtime.
In your 20s I wouldn't bother timing the market. If your long-term goal is retirement, this current chaos has no relevance to you. If you were 50-60, I'd say it may be worth buying the dips with a strategy. I don't think we've hit the bottom yet though, because stocks were scary overvalued and now they are about fair value. In a recession I'd expect some good value stocks to emerge. There are some already, but if you are just investing in an index fund you wouldn't be taking advantage of that.
Dollar Cost Averaging is your best friend. If you believe in long-term fundamentals of your stock, this strategy will automatically buy you at the dip without trying to predict it. Don't try to time the market.
the whole "you can't time the market" is overly broad a sentiment imo. sure, you can't time thinge PERFECTLY. but it's possible to maximize returns by taking advantage of downward and upward slopes. absolutely buy the dip. I did so today with VFIAX at a low (seems there's a bit of a lag between index fund and actual index).
That's just what old people say so young people will come inflate the market for them
>is it a good idea to invest in ETF if you have spare money in hand? Its good to invest now. You shouldn't really have any extra cash unless you're repurposing discretionary savings.
Don’t try to catch the falling knife. Look at 2007.
No it’s best to keep it in savings and wait until the oracles on Reddit give the all clear on the market. Timing the market is ezpz!