Why Buying the Dip Is A Terrible Investment Strategy

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Why Buying the Dip Is A Terrible Investment Strategy

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Күн бұрын

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While still working as a trial attorney in the securities field, I started writing about personal finance and investing In 2007. In 2013 I started the Doughroller Money Podcast, which has been downloaded millions of times. Today I'm the Deputy Editor of Forbes Advisor, managing a growing team of editors and writers that produce content to help readers make the most of their money.
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Пікірлер: 196

@rob_berger Жыл бұрын

Remember that I'll never ask you to call me or give out a Whatsapp number? If you see someone in the comments claiming to be me and wanting you to contact them, they are a scammer. Let's be careful out there!

@jonathanmartin2480 Жыл бұрын

When I hear "buy the dip", I don't think of someone who holds cash waiting for a downturn. I think of someone who sees the market is down and thinks, "in addition to my regular investing/DCA, I am going to add another $500/mo I would normally spend."

@noreenn6976 Жыл бұрын

That's me. I just add a little extra.

@psyskeptic9979 Жыл бұрын

that strategy is fine

@pwsiegel Жыл бұрын

Your strategy is outperformed by the following: if there is $500 per month in your budget that you don't need to spend, invest it instead of spending it regardless of what the market is doing. Timing your monthly investment rate is still market timing.

@atc404770 Жыл бұрын

Just did the same thing today. I saw the best price I’ve ever seen for a Trijicon ACOG sight today and decided to pass on buying it because the market is down so much. I’m buying the dip instead. Just investing above and beyond what I have been doing regularly.

@Jack-su4sz Жыл бұрын

Rob gaffed he made it sound like you have to be totally out of the market. To buy the dip.

@allenn7955 Жыл бұрын

As a long term investor, when the dip gets to a certain amount on a stock/etf, I always take advantage of it. If it keeps getting lower, I'll keep buying what I can.

@chinhuawang8141 8 ай бұрын

Buying dip is bad investment strategy as with inflation all asset price goes up. However, it is a good tactical, especially it aligns your asset allocation and as a part of portfolio rebalance.

@henrymarkson3758 Жыл бұрын

Decades ago, the legendary Jack Bogle was asked, "When is the best time to invest?" he replied, "When you have the funds to do so". People never learn though, so every generation reinvents the wheel.

@BillyCarsley Ай бұрын

Yes but it's more complicated than that. I can't just let my money ride in the market when I'm trying to buy a house with cash.

@thesig301 Жыл бұрын

This information is most useful during regular market conditions, you can’t wait for a crash, you’ll likely lose out. However right now we are in the midst of a 20-30% downturn so sure right now is a great buy since the market HAS ALREADY crashed and you’re not waiting.

@thesig301 Жыл бұрын

Essentially, if you’re already in the middle of a recession/downturn and you have lots of cash currently on the sidelines, it’s great to invest your remaining cash.

@andrewroth9175 Жыл бұрын

I had a great run 2008 thru 2021 and was 100% stocks. Retired at 59, pulled 30% went to cash, money market. Getting 2.5% on cash and going up….. No risk of principle like bonds. Made the decision that bonds were not the place to be with a rising rate environment.

@toddhallam9598 Жыл бұрын

DCA is a winning strategy! Worked well for me for 30 years. Not changing that now. Buy and hold.

@clarazegarelli5861 Жыл бұрын

usually you dont leave money under the mattress waiting for the dip, you deploy it in other opportunities. so another interesting analysis will be to assume you can make 6% while waiting for the dip. Any how it is just to theorize.

@stephencullum8255 Жыл бұрын

Basically market timing does not work. I also have seen arguments that taking your RMD all at once over time is not as good as taking periodically over the year.

@johngill2853 Жыл бұрын

The same thing applies to all your retirement withdrawals. Because statistically the stock market goes up more than it goes down

@hulenbryant5637 Жыл бұрын

I'm like @Jonathan Martin , when I hear "buy the dip", I think of using discretionary dollars I would normally not invest to buy a stock that is 'on sale'.

@robsteal3887 Жыл бұрын

In the long run buying the dip does work. However, like Bogle once said, if you have a strong reason to believe that the market in the short term due to maybe some current or up coming events it's fair to say it's better to hold off and buy later. And right now the US economy and the markets look bad and are only going to get worse, not just here but markets and economies around the world. Unfortunately self inflicted and until the policies change or shift course things will continue to struggle and tank. Simply bad economic policies, all political and we're all along for the ride. So with that said, I'm waiting until the bad policies shift or get blocked some how.

@jeffsim4191 Жыл бұрын

Perhaps, I don't know, something like a covered call strategy would be valid... Increased income payouts with a bit of downside protection and then use those payouts to buy into the market as it falls. Risk is missing out on big upswing of course, but at least you can partially take part in it.

@OnCashFlow Жыл бұрын

I automatically liked the video because I knew the video was going to be good! I think if investors want to "buy the dip" they should just invest additional money during a dip if it makes them feel better, It would make me feel better because then they are investing more, and that's almost always good. For example: You make $5,000 per month. You invest 25% of your income or $1,250 per month. The rest is spent or saved to be spent later. Then a market downturn occurs. You can now decide to forgo some spending and invest an extra 10% of your income that month ($500). So you ended up "buying the dip" with an extra $500 instead of spending it. You just made a big win psychologically and mathematically.

@ChrisKAloha 2 ай бұрын

I bought the dip on Friday just because it is fun to buy even if the dip is tiny.

@Youtube_Enthusiast_ Жыл бұрын

I think this is really dependent on how you define buying the dip and what you do when you buy the dip. There are a lot of ways to buy the dip and feel doubtful the studies captured them all.

@mihandsplitters705 Жыл бұрын

I prefer DCA it’s too hard buying the dips because when you hit your threshold at least I always want to wait for that “better deal “ that never seems to materialize!

@noreenn6976 Жыл бұрын

No music, perfect. Overhead Mic sounds great! Thanks @Rob Berger

@rob_berger Жыл бұрын

I worked on some post-production audio editing and then listened to it on our surround sound before publishing it!

@xzygy Жыл бұрын

I usually try to tighten my belt a bit and invest more in a down market, and relax a little bit when the market is up.

@OllertonMD Жыл бұрын

the title should be "why WAITING to buy the dip is a terrible investment strategy." if someone is able to invest more than they usually would during a dip, its hard to argue against that being a great idea.

@gentronseven Жыл бұрын

It makes more sense to focus on when to sell not when to buy, anytime the MACD crosses down on the monthly chart it's time to sell if you're a long term investor and time to buy when the monthly MACD recovers. In the last 25 years this has only happened 5 times and if you followed it you'd be beating the market significantly, as long as the monthly MACD isn't giving sell signals.

@alleneverhart4141 Жыл бұрын

If buying the dip doesn't work then how about buying the "rip" - if we wait until the market advances 5,10, or 20% how does that work out?

@johnny_blades 7 ай бұрын

Corrections are a good time to pull some profit and reinvest after. If that's buying the dip, I'm in! 😃

@BarnabyBarry Ай бұрын

Always good information-If you have the cash-invest in T bills and wait and when it dumps buy low-DCA are for people with very little to invest! (Generally speaking especially with volatility like BTC)

@DicksonMaimouth Жыл бұрын

Well, the explanation at the beginning of the video explains one strategy, but I use auto-invest to DCA without altering that schedule and also buy the dips when prudent.

@MrNoBSgiven Жыл бұрын

I do agree with a young people who have 40-50 yearsmto invest. Even tnose whonhave 20 years to invest. Hovever, if you are already in your retirement. And ALL macroeconomic data is clearly showing that the severe recession or even worse is imminent, I would ventire to argue that taking your chips off the table and putting them in safe cash is way less costly than waiting like a deer on the road waiting for the car to hit you. FOMO is a difficult emotion to overcome. Looking at ling term MACD trend of market or sky-high Buffett indicator and waiting inncash is incredibly difficult. 20% down is not a problem, but lets also remember that markets dropped 80% or more over period of 2-3 years. Stock markets may drop only 40% innfirst year, bit follow with another 1- 2 years equally bad 2020 was bad but very short as FED pumpedmtrillions of dollars in QE and goverment added even more of "free" money, froze evictions. Now, these options are out off the window, and will NOT happen. People will be losing jobs and houses the way they were in 2008. Layoffs, loan defaults, high inflation, defaults on electrical bill by 20 mln of Americans .... this is the train coming our way and staying on tracks is a very bad idea. What do you thing an 80% shave from a retiree at 65 with 500k do, or even 1-2 million, When inflation is raging at 12-15%? Maybe, it is better to step off the tracks, let the train pass, and then rejoin the journey. Parking money at 4% for a year or two is better then getting hit with 80%+ "correction" IMHO. And let's remember - it is very unlikely men would be jumping off the buildings after losing 20 or even 40% the way many during 1929 crush, would they?

@eb1888. Жыл бұрын

Unfortunately, it's not 2008. Today isn't the same. Different conditions always create different outcomes.😃

@MrNoBSgiven Жыл бұрын

@@eb1888. exactly. It's going to be worse.

@eb1888. Жыл бұрын

@@MrNoBSgiven We'll look back on this prediction when we're in the future. I'm not feeling the uncertainty today I felt in 2008.

@KitRodrigue7501 Жыл бұрын

Basically it's buying the dip vs opportunity cost

@MC-gj8fg Жыл бұрын

We don't know when a dip will happen of course. We can, however, understand that it is likely sometime in the relatively near future and, based on historical averages estimate a conservative number to pull the trigger at whenever it happens to occur. There are no guarantees, but I see no reason why we cannot put the odds of success in our favor with an estimate of expected value.

@Judah_Mafia_074 26 күн бұрын

I like to DCA buy if I see any dip even a 0.01 im most definitely buying it’s hard to time the market so DCA is best. Time in the market

@JM-cb2hw 21 күн бұрын

I think you need your foot in the door first, in other words you need to be in the market already before you consider holding your capital for a downturn to buy.

@metalfatigue Жыл бұрын

It would be interesting to know where value fits in. When Warren Buffett is asked why he has so much cash, he says it's because he can't find enough good stocks at a price he's willing to pay. It's like he has faith in the American economy, but it's not unconditional. Trust, but verify.

@natelammers652 Жыл бұрын

What about a percentage based DCA/Buy the dip? Say I invest 80% of what my goal is, and the 20% sits in cash and waits for the occasional market downturn to buy?

@romanlawing2864 Жыл бұрын

Never thought that was what buying the dip meant.

@markperry1555 Жыл бұрын

Nice video. Very easy to follow and good to know the easy route (Dollar Cost Averaging) is the best thing to do.

@AXLee27 Жыл бұрын

If you dollar cost average in smaller dips or retracement, it's a great strategy for a more sophisticated investor. In the example you gave, buying when it makes a 20%+ dip is too extreme. Bear markets happen on average every 5-6 years. However, for the average investor, it is just best to dollar cost average in periodically wherever the market goes.

@Caspertheconstantreader. Жыл бұрын

I still remember the last issue of ROM, still a great comic. Thank you for the analysis and rational discourse.

@user-vs3jj5wn3y Ай бұрын

Maybe I'm being too simplistic, but while dips are tough, they simply don't seem to happen often enough to wait around for. Is my thinking off? Rebalancing somewhat mitigates this effect, yes?

@mikephilpot9857 Жыл бұрын

Get money into the market asap. Don’t even wait to DCA if you have a sum available. Just buy and hold the portfolio that meets your needs. Don’t keep cash out of the market unless you have short term spending needs. 👍

@jimmac213 Жыл бұрын

Even with inflation as high as it [still is] and the Fed's having to aggressively increase rates for the duration of 2022 to get it down... I think another month or two would be ideal.

@mikephilpot9857 Жыл бұрын

I know how you feel; but, I’d still put it in. You never know when the market will go up. Anything can happen. We never know when is the right time to get back in when we try to time the market.

@MarsM13 Жыл бұрын

You could always do a Value Investment analysis, sell Put Options on a fair or below fair price, and either keep making money on Puts or get the stock for a good value.

@stevegold2717 Жыл бұрын

The only consideration on whether to buy the dip or not, is if you can do better elsewhere, if you can’t do better, than it doesn’t matter, if the market does as good as avg, or worse, it’s the best you can do

@rmb5355 Жыл бұрын

stay the course and you will be rich!

@hanwagu9967 Жыл бұрын

I think Nick's base premise is incorrect, since he's sort of comparing apples to oranges. He is comparing DCA to buying the dip, which aren't the same. Hoarding cash when the market is low and waiting until it raises to then drop x% which is higher than the starting point, means you will always be buying higher than DCA. So of course DCA is going to outperform buying the dip since you are always investing at a lower price. To me, buying the dip is if you have cash available when market/fund/stock is high and wait for a % dip in the asset to buy. So, your cash was realized when the market was higher from the beginning, not when it was lower. If I'm planning on taxing profit from an asset, the cash is going to be higher than the dip. If I'm selling underperforming stock and to offset cap gains, i'm going to be buying a different asset at a lower price because of the dip. Also, you may consider taking on additional risk and buy on margin on a dip, or put additional cash you had at risk to buy on a dip. On the latter, I accepted risk in reducing my income disruption fund by two months to buy a dip. The opportunity cost for me isn't DCA, but the interest gained from treasuries or high yield savings account versus the adding some risk to purchase on the dip. I also rolled over after tax 401k into roth and traditional IRAs, essentially profit taking from the 401k selling high and purchasing stocks at a discount in the rolled over IRAs because of the market drop.

@AbcDino843 9 ай бұрын

Buying the dip is a fantastic investment strategy, waiting for the dip, which is what this video should have been titled, is not a good investment strategy.

@alyap4094 Жыл бұрын

The Best Time to Buy is Now. No need to wait for another dip that may or may not happen. The market can bounce up anytime.

@TonyPharmD Жыл бұрын

It's ironic that you made this video during the dip where the low in October 2022 would have been a great opportunity to earn a significant return in the short term, but I appreciate your long term view.

@chrisofnyc3936 Жыл бұрын

I guess I misunderstood "buy the dip" for quite some time now. No matter what I continue adding to my investments, I just add a little bit more specifically into whatever it is that I'm looking to grow my position in whenever it dips. I don't just leave my investment money out of the market until it dips, that's "timing the market" in my opinion not "buying the dip".

@AbcDino843 9 ай бұрын

No, you didn't misunderstand anything, this video is mistitled. It should have been titled "Why waiting for the dip is a terrible investment strategy".

@panamahub Жыл бұрын

So waiting for the dip is the bad strategy and not actually buying the dip?

@ryanshook8284 Жыл бұрын

Bingo. I believe that’s the main point.

@Ferdinand208 Жыл бұрын

I always have my own dip at home so I don't have to buy the expensive dips at the food places. Or were you talking about the stock market? That would make more sense... 😝

@michaelswami Жыл бұрын

I buy every 1st, 8th, 15th and 21st, regardless of what is happening. Thanks for this excellent video.

@richardhead2318 Жыл бұрын

I wonder how likely a dip would be given rising interest rates and an historically high Schiller P/E ratio.

@jeffhorne2553 Жыл бұрын

DCA is the art of buying the dip... I agree with several of the other comments, in market such as our current, I go find money to buy this down turn,in increments..

@dannyhantx Жыл бұрын

Yes, don't buy when it's lower, buy at all time highs instead.

@SpaceTravel1776 Жыл бұрын

Don't think "buy the dip" to anyone means holding cash for 5 years waiting for a certain percentage fall. It's more likely some variation of what to do with short-term or new cash or switching out of underperforming assets and considering buying back in timing.

@MRkriegs Жыл бұрын

This

@supersteve8305 Жыл бұрын

That is very surprising.

@carlkoch6460 Жыл бұрын

I love this channel. Excellent info.

@danboruchowitz9803 Жыл бұрын

Great video, thanks Rob! Enjoyed the Nick Maggiulli article, great follow up.

@ricardodelacrvz1400 Жыл бұрын

Buying the dip is simply not a strategy, its just a thing everyone wise does. the most important thing is increasing your portfolio cap all the time the price seems fair for a long term business. buying only the dip or quitting will cost you money in the mean time because you losing great profit benefits when stocks are in their middle ground. you also have to take notice that as times goes on, you can always do capital allocation from whos at 3x 4x in the long for a great opportunity in a dip. it comes with time. having a only buy the dip mentality is a short term strategy that in the long term will cost tons just because youre trying to dump all your money on a -20% reduction but wise investors take cash an put it in 0 to -20% situations and still make money. even a 1 or 2% abver fair price is still a good investment if you look at it in a long term view, especially equities which you can trade later for a better stock investment.

@arpitkumar4525 Жыл бұрын

You can buy the dip incrementally by withdrawing small portion from your emergency fund and then replenishing it when the market recovers. If an actual emergency occurs during the dip(Scenario 1) and your remaining emergency fund is not enough(Scenario 2). The prob of both these scenarios happening within a short period of dip is very low. But if it happens you can take back your money from the mutual fund at a little loss or take a loan. That's the risk you are taking but it is very low. Also you invest incrementally in the dip to track the dip. If month 1 there is a 5% dip invest 5% extra. If month 2 there is another 10% dip from month 1 then invest 10% more than month 1

@donhill1825 Жыл бұрын

I think withdrawing from an emergency fund like this is an insane strategy. In particular, the idea of taking out debt on top of robbing the funds. It's an "emergency" fund not a "buy dips" fund. I find it useful to think of the emergency fund as insurance. To each their own though.

@vitaliygoldin5423 Жыл бұрын

What if you invest more money in bear markets? As in put more money than usual.

@rob_berger Жыл бұрын

It's really the same issue. Where did you get the extra money? If you had it all long, why not invest it when you can?

@jasonhobbs2405 Жыл бұрын

Just means either you should have been putting in more all along or you’re cutting into cash reserves/emergency fund (ie increasing personal risk). Now if you invest more by earning more or spending less and therefore increasing the percentage of income you are investing, that’s fine. But once again… should you just have been doing that all along?

@HamiltonRb Жыл бұрын

@@jasonhobbs2405 Another option is coming into new money during a dip. We downsized to a condo last month because we are empty nesters now and the difference between selling our home and buying the condo was close to 400K, and fortunately the markets are down now so we decided to split that amount into two monthly investments. I suppose in the long run it means nothing, but it feels like a bargain

@jeffsim4191 Жыл бұрын

@@rob_berger Well.... If you have the extra money in a different vehicle (high interest savings etc) and see P/E ratios improving as the market sinks then, if you believe in the value factor, at some point the excess expected returns can make it attractive enough to increase the percent of one's equity position. If this isn't true, then why would one choose to tilt towards value? They should just continuously put money in regardless of the valuation.

@JC-li8kk Жыл бұрын

I buy a stock when it becomes undervalued. Doesn’t matter to me if it’s today or 5 years from now. If it drops 30% in 1 day or takes 3 months, when it hits my “undervalued price” that is when it gets bought. Every stock has a price I’m willing to pay. There’s no such thing as me just wanting to own a name for the sake of owning that name. Has to be undervalued. The day it becomes overvalued I sell.

@sergiosantana4658 Жыл бұрын

A value averaging strategy can also be considered ,especially during volatile times . It seems that by sheltering some of the gains after a strong bull run you can value average into or out of the market at a pre determined rate . If your pre determined rate is 8% and the market delivers an 11% return you will sell enough shares to bring you back down to the pre determined rate of 8% and the following year if the market delivers a return lower than 8% you will take the cash and buy into the market to bring you back up to 8% . It seems this strategy will force you to buy low and sell high putting your cash to work in place of just sitting idle waiting for the dip.

@jeffsim4191 Жыл бұрын

Potential problems to this though... If you sell above 8% and it just keeps going up then you never get that money back in. Or, if it is a sideways market you sell above 8 and then it retreats to say 4% but never goes down to -8% then all that money is sidelined collecting no dividends etc.

@sergiosantana4658 Жыл бұрын

@@jeffsim4191perhaps I did not explain this well. By value averaging you will guarantee a pre set gain . In my example the only time you will not need to make a move is when the market hits your pre set number . Example if your pre set number is 8% and the market is flat you will need to buy back into the market to bring you to your 8%.pre set gain. But like you mentioned there is the drawback of losing out on gains over the pre set goal but rhis will force you to sell high and build up your cash cushion so you have the funds available to buy low when the market tanks.

@aeakos99 Жыл бұрын

What about doing it like “counting cards” in blackjack? Meaning you DCA but when there is a “dip”, you double down or invest larger amounts?

@saulgoodman980 Жыл бұрын

Happy I knew this intuitively, and I'm just 23!

@jmc8076 Жыл бұрын

As or more eye opening then the dividend videos. Thx from 🇨🇦

@sanekabc Жыл бұрын

But would you agree that if you are not already in the market and are 70 years old sitting on a wad of cash that you should indeed wait for a major dip before buying into the market??

@JC-li8kk Жыл бұрын

Yes, but I wouldn’t wait too long. There are stocks with 5-7 p/e with 4-8% dividends that I would start buying now. VZ, WBA, HPE, TPR, CMCSA. I’ll be happy to keep buying them if they drop even lower. I plan to spend $2,000 on each & I’ve only spent about $500 so far. But it’s a struggle not to buy more every day I see them red.

@rapfreak7797 Жыл бұрын

I read that article from your weekly newsletter and found it an interesting read. Glad to see you expanding on the topic.

@azmindspin311 Жыл бұрын

I think there is a hybrid strategy here that could prove to be the best of both worlds.

@malaybasu961 Жыл бұрын

Good discussion, but one thing is missing. What about smart DCA, where you don't wait but do a more market-based DCA, based on some momentum indicators, such MACD or RCI. I have been following a MACD-based strategy that aggressively puts more money as the market goes down. Will it outperform the naive DCA?

@JamesAndrewMacGlashanTaylor Жыл бұрын

As a new investor, I didn't exactly know what buying the dip meant in concrete terms. Sure, buy when the price goes down. But there are many ways to do that. And, simply thinking it through without any data, it is clear that one can come up with multiple scenarios which you highlighted in this video when "buying the dip" is actually paying a premium. And so, I always thought, "surely!", that cannot be what people mean when they say, "buy the dip". Sometimes it could work. And sometimes not. And it is an empirical question as to when it works and when it doesn't. Leaving yourself vulnerable to those kinds of contingencies is not a strategy at all in my opinion. The only strategy I can think of that makes sense out of "buying the dip" is to ONLY buy the dip if it reduces your cost basis using the funds from your future scheduled DCA investments. Otherwise, continue your regularly scheduled DCA regime. But when a dip does occur, the amount that you take from your future DCA investment is determined by the percent of reduction to your cost basis. And maybe you make a rule that the dip must be a certain minimum percentage below your current cost basis, say 5% or 10%. And as the percentage increase, you pull more and more funds from your future scheduled DCA investments until you max out, e.g., you reach your $6,500 limit in your ROTH. I just opened up my first ROTH account at age 41. I haven't taken any positions yet - it is that fresh. Does the above strategy make sense to you as a viable "buy the dip" strategy? Again, I am simply thinking it through. I am not a math and numbers guy. Thanks.

@jmc8076 Жыл бұрын

Good points. My husb and I have been investing for many yrs and educating ourselves with good books and now a few video sources. We are Cdn. For us we have a watch list incl certain price and a funds/stocks we want to add to on a ‘sale.’

@NolanGouveia Жыл бұрын

Stay the course yall. Consistently invest in great ETFs with low fees! I know it’s tough but keep up the good work friends 👊

@JamesNeilMeece Жыл бұрын

What if there is, say, 3 things you invest in. Each month/week, you pick one. Would buying the dip on one of those work out?

@igotbit9454 Жыл бұрын

Buying the dip is a bad strategy Buy high, sell low is the way to go

@deanaz41 Жыл бұрын

Paul at Everything Money needs to see this. Great video. At first I was confused because I thought ‘buying the dip’ was ‘DCA’. New subscriber. Long GOOG

@Compounddeznuts Жыл бұрын

Hey Rob, reading your book rn and it’s very good! I’d recommend it a friend new to investing

@Rev0ltTTV Жыл бұрын

Insightful. Does DCA'ing being better than Buying the Dip over a long period of time hold true in a volatile market like the cryptocurrency market as well? Or would a volatile market like that mimic the 1920's and 1930's stock market where buying the dip could be more profitable?

@randolphh8005 Жыл бұрын

Could you clarify whether the data is based on DCA with rebalancing or not and then with what portfolio structure. Rebalancing is at least a mathematical form of “buying the dip” if you do that annually.

@aorjarsrelaxingvideos6126 Жыл бұрын

Warren Buffet Just BOUGHT THE DIP in this Undervalued Stock…

@cato451 Жыл бұрын

Buying the dip is terrible because there are too many questions: When is the dip? Is it a dip or a landslide? What point in the dip? How much to buy in the dip? Remember the great film “Margin Call?” All those buyers thought they were buying the dip too. Lol

@carrie5709 Жыл бұрын

I have a question that isn't necessarily related to today's video. I wonder if you have ever used Ally Bank mutual fund Robo account option? I was wondering if you would be so kind as to go to Ally Bank and pretend you are going to invest, $1,000 into a mutual fund Robo account. Then click least risk and click socially responsible. Click on planning to invest it for up to 5 years. Goal is to generate cash. Next you will see the funds that this investment would go to. I wonder what your opinion is of these funds. I am familiar with Vanguard but not the others. What is your opinion of this approach to investing? I am retired. It is a little higher return than their 18 mo. CD rate but less than a percentage point. Thank you so much for your time reading my question. And thank you for all the youtube videos you create and share with us.

@ph5915 Жыл бұрын

Sounds like it's just a variation of 'timing the market/stock/index/fund'. Plus, as you pointed out, there's the opportunity cost of leaving stranded cash on the sidelines doing nothing. Probably a baked in version that may work is buying into value 'stocks/funds'. They are already companies that are in the 'dip'...

@seejfly2086 Жыл бұрын

Invest long term. Rebalance as necessary. Max out retirement accounts if able.

@cppguy16 Жыл бұрын

Yes, this is more of a "feel-good" statement. Yikes, the market is down, but at least I'm buying the dip. The best you can do is save and invest more when we're in a dip. But it's not going to make a big difference when you already have a huge amount invested. How much money can an average person come up with in a moment's notice, to buy the apparent dip? I can save and invest an extra $500 a month by delaying non-vital purchases, stop eating out, or start investing the emergency cash.

@JC-li8kk Жыл бұрын

You have to raise cash when we are overvalued. A lot of ppl get too attached to their stocks so they never want to sell the whole thing (me included). Very dangerous to do that. Apple has a p/e of 24. No one should own anything that expensive in this environment. But how many ppl do you think are holding Apple?

@Lukionest Жыл бұрын

This video would have been so much better if you had some annoying music playing in the background, lol.

@noreenn6976 Жыл бұрын

😆

@mere_cat Жыл бұрын

I'd like to know if buying the dip works in combination with "selling the peak." Sitting and waiting with cash that could be earning dividends seems like a losing game, especially if you have to wait years to put it to work. But if it is combined with selling at the peak, it becomes market timing. I don't know of many market timing schemes that actually outperform the market though. Meb Faber claims that using a 200 day moving average can slightly outperform the market, but not all the time. He nevertheless splits his investment strategy between buy and hold and market timing. It would be nice if someone could evaluation the "perfect knowledge" scenario of selling the peak and buying the dip because that is realistically what people are trying to do when performing market timing.

@jmc8076 Жыл бұрын

Interesting point.

@hagakuru Жыл бұрын

The dip is happening right now - you're not going to see something like what has gone on for the last 2 weeks again for a pretty long time.

@impens1030 Жыл бұрын

Very relevant. But in reality isn’t DCA is a kind of buying the dip ? The real alternative would be to invest the total amount in one go?

@sergiosantana4658 Жыл бұрын

No. When you DCA you are buying at a pre determined dollar amoint regardless of the market conditions . And by buying the dip you are out of the market creating an opportunity cost while you wait for equity's to go on sale.

@mattcornell6665 Жыл бұрын

Rob thank you so much for this video. I truly can't thank you enough for this. I have been beating myself up over and over again for several months now because I put a bunch of money into the market around the beginning of this year. Basically the worst possible time I could have done that. This video makes me feel a little better because I just did exactly what you say you always do when you have money to invest, so again this makes me feel better and I guess I don't need to be so hard on myself and I should stop beating myself up. Thanks again Rob

@e.g.7977 Жыл бұрын

You're not alone. I did the same thing.

@mr.financial Жыл бұрын

Lump sum investing is mathematically the better way to do it. Especially with tax advantaged accounts. Taking say, 100k, and taking a year or two to invest it by DCA will 4/5 times result in a worse performance. The reason is, three market is usually a bull more than a bear. So DCA makes one purchase at higher prices. To off set thatva little, value invest 😎 that worked in any market

@hulenbryant5637 Жыл бұрын

@@mr.financial That only works IF you have a lump sum at day 1. So, saving up a "lump sum" to "buy the dip" like Rob is talking about is not better than DCA over the period someone is saving.

@mr.financial Жыл бұрын

@@hulenbryant5637 I think that is part of a misconception in the investing community. That's lump sum investing. When you dump all your available investment cash into the market at once, even if it is a small dollar amount.

@mr.financial Жыл бұрын

@@hulenbryant5637 not at all. Even most financial advisors will slowly deploy cash into the market. A set amount per quarter. That is a very traditional way of doing things.

@ctyreman11 Жыл бұрын

Lump Sum > DCA > Buy the Dip

@alf001red 7 ай бұрын

When there is flat for the years Buy the Dips works fine

@jonathankuo2076 Жыл бұрын

Hi Rob, if your value is only based on the shares you own, wouldn’t buying the dip is always going to be better?

@thalys5208 Жыл бұрын

This title is misleading. Buy the dip but don't wait for it. When the dip comes it's an opportunity.

@dondadondon1213 Жыл бұрын

Looks like a home run to me analysis. Thx, Rob!

@davidwinebrennerjr4196 Жыл бұрын

What a great video Rob thanks

@SasoJakljevic Жыл бұрын

Great video. Thanks

@shaunsprogress Жыл бұрын

Buy below fair value. End of.

@zhizhong92 Жыл бұрын

Great video rob! Question though. Do you feel the S&P 500, or stocks in general are all overvalued due to the stimulants packages and QE? I’m struggling to buying more because a lot of so called experts are saying the numbers in the past 2 years are not reflective of their true values. And that the true value might be 20-30% lower from the high in Dec 2021.

@johngill2853 Жыл бұрын

There true value will probably be decided by future events and Nobody has no idea what the lows will be. If your long-term investor I would keep periodically investing in the market every payday

@MRkriegs Жыл бұрын

Ummm we are already at that 20-30% low. Today!

@jeffb.2469 Жыл бұрын

I bought the dip, and the dip kept dipping.

@jimjackson4256 Жыл бұрын

So if you don’t buy when prices are down when do you buy?

@JohnSmith-ps7hf Жыл бұрын

I'll buy more when the S&P 500 is below 3300.

@e.g.7977 Жыл бұрын

In my unfortunate case, i bought at the peak and it's been nothing but watching my money disappear since. Haven't sold though. Staying disciplined.

@navagiopoint Жыл бұрын

when the upward trend is obvious, its usally over valued

@stevegeek Жыл бұрын

Same here 😢

@wilma6235 Жыл бұрын

No the dip is a set amount $80. You don’t reset the amount just because it increased. Selling in Dec 2021 when everything was high, and reinvesting now is smart.

@cppguy16 Жыл бұрын

It's hard to tell. When the pandemic hit China, and a handful of infected people reached California, the pandemic was kind of inevitable, despite what the government said. But then the recovery started a month after the dip, it was unexpectedly quick and steep. When US intelligence surfaced that Russia was going to attack Ukraine, not many believed it. The SARS outbreak of 2002-2004 could've become a major pandemic, too, but it didn't. It's easy to be smart in hindsight. You cannot predict the absolute top and the absolute bottom. Sure, I would sell in December 2021 and buy back in June 2022. But how would you have known that? The collapse could've come from June 2021, instead of December, and the dead bottom was even more unclear. I did invest what I could during the dip, but it could've kept going, and still could continue.

@johnmininger8589 Жыл бұрын

I don't let my cash sit on the sideline but I do think that if I'm going to invest in an equity, I want to pay a fair price that I believe will give me a fair return. That doesn't mean trying to time the market for a dip or a bottom, it simply means establishing a price you are willing to pay for an equity and buying near or below that price. There are plenty of great companies that I would like to be invested in that have been, until recently, simply too overvalued, so I will put my money to work elsewhere.