Do Bogleheads "Buy the Dip"?

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followtheplan
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Do Bogleheads "Buy the Dip"?

Post by followtheplan »

To preface, I am a newish (just over a year) index investor that holds a 3 fund portfolio which I DCA into.

I'm currently reading the book "The Tao of Charlie Munger" and one of the stories in the book talks about Charlie & Warren Buffett having their own hedge fund.

At the time Warren thought everything was overvalued so he wasn't investing and held onto his cash. Charlie however kept investing, and then the market went south.

Warren, sitting on plenty of free capital, made his move. Charlie at the time, wasn't able to do that, and it was a big regret.

While it will be said that what I'm asking about is "timing the market", and I couldn't even try to counter those comments with a rebuttal, so I will state now, yes it IS timing the market.

With that said, do any of you keep a cash reserve to take advantage of times like these? If the market were to be down a large percentage* and you had the funds available, and God willing, the years (decades) to wait for a recovery do you have this worked into your investment plan?

*I'll also throw in the caveat of not knowing if the market could go down further than the point you'd buy in.
Last edited by followtheplan on Sun Feb 04, 2024 3:21 pm, edited 1 time in total.
Triple digit golfer
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Re: Do index investors "Buy the Dip"?

Post by Triple digit golfer »

I do hold some cash, but not for investing into stocks. Any cash for investing is always invested.

I buy dips and peaks and everything else in alignment with my desired asset allocation percentages.
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Re: Do index investors "Buy the Dip"?

Post by muffins14 »

Unfortunately we cannot see the future, so you don’t know If you are incurring a large opportunity cost by waiting to invest, or if you are a genius and the market will go down and then immediately recover.

No one knows.

What is certain is that the expected return of stocks is higher than the expected return of cash. You expect mathematically that holding cash for a downturn is worse than remaining invested. You can gamble and possibly win vs the “house”, even though your odds are winning are lower than your odds for losing.

It’s possible that your satisfaction from “winning” once or twice is large enough that it compensates for the fact that you’re likely wrong most of the time.
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Re: Do index investors "Buy the Dip"?

Post by KingRiggs »

I buy monthly, usually around the 15th of the month. If I see a REALLY BAD DAY (RBD) occurring near then, sometimes I'll buy a few day in advance.

I feel that's a very minor form of market timing, and I more often than not just buy on the 15th, even if prices are up.

20 years from now, it will likely make a very minuscule difference.
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funxional
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Re: Do index investors "Buy the Dip"?

Post by funxional »

The market doesn't go up smoothly and you can't know when the dip comes.

If you are out for a year ( or 5) waiting for the dip there is a good chance that you are still buying in higher than when you started.

You can also buy in before it bottoms out because you can't recognize the peak or trough.

It's not any different than picking a stock. It's really hard to know "over" or "under" valued and even overvalue can continue for years
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Re: Do index investors "Buy the Dip"?

Post by Wiggums »

We are retired and our cash is less than 5% of the portfolio. During the pandemic market crash, we rebalanced. Since we were stuck at home, we started buying weekly with extra cashflow. We have our purchases automated. It is better to be invested do that you don’t miss the big upward moves.
Last edited by Wiggums on Sat Feb 03, 2024 8:22 am, edited 1 time in total.
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bendix
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Re: Do index investors "Buy the Dip"?

Post by bendix »

I think the underlying problem of your approach is: You are not Warren Buffett. If you were, you´d be foolish to follow the Boglehead approach. But let´s be real here. You´re not Warren Buffett and you wouldnt have his instinct and insights, so maybe his investment approach isnt right for you. If you realize you are not Warren Buffett but want to benefit from his expertise, you could buy BRK-B and be done with investing.
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Re: Do index investors "Buy the Dip"?

Post by livesoft »

followtheplan wrote: Sat Feb 03, 2024 8:00 am...
With that said, do any of you keep a cash reserve to take advantage of times like these? If the market were to be down a large percentage* and you had the funds available, and God willing, the years (decades) to wait for a recovery do you have this worked into your investment plan?
No,I do not keep a cash reserve to take advantage of buying equities lower. Nevertheless, I do buy equities lower. How is this possible you may ask? The answer is EASY: I sell some of my fixed income holdings and use the proceeds to buy equities. Some folks call this Market Timing Rebalancing. I do this in a tax-deferred account which has both equity and fixed income investments.

Some recent "rebalancing" trades:
Equity (AVUV)
Image

Bond (BND):
Image

Do you see how no cash reserve is necessary?

(Also these rebalancing transactions were already mentioned by me in another thread: viewtopic.php?p=7688634#p7688634 )
Last edited by livesoft on Sat Feb 03, 2024 8:26 am, edited 1 time in total.
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followtheplan
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Re: Do index investors "Buy the Dip"?

Post by followtheplan »

I guess I should clarify that I'm not waiting for a dip.

I'm DCA my normal amount at my normal time.

I guess I'm asking: If there was some event where the market dropped 30% or more, would you be inclined to use cash you held elsewhere to take advantage of market at the time?
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TimeIsYourFriend
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Re: Do index investors "Buy the Dip"?

Post by TimeIsYourFriend »

Cash has a high opportunity cost and one of the worst investment returns of all assets. So when does the next dip come? You can have years of incredible stock returns with no dip. Meanwhile your "dry powder" as it's called is languishing in poor returns and when the dip finally occurs, the price you are paying for stocks might be higher than when you started with the dry powder. So you are worse off.

You could keep a cash allocation or ultra-short term treasuries in your portfolio permanently and deploy it on once in a lifetime opportunities but when everything in the world is looking bleak, that is probably the worst time for you to dump your liquid capital. Who knows, you might lose your job 2 weeks after you deploy it and your stocks have gone down even further from that point.
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followtheplan
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Re: Do index investors "Buy the Dip"?

Post by followtheplan »

livesoft wrote: Sat Feb 03, 2024 8:22 am
followtheplan wrote: Sat Feb 03, 2024 8:00 am...
With that said, do any of you keep a cash reserve to take advantage of times like these? If the market were to be down a large percentage* and you had the funds available, and God willing, the years (decades) to wait for a recovery do you have this worked into your investment plan?
No,I do not keep a cash reserve to take advantage of buying equities lower. Nevertheless, I do buy equities lower. How is this possible you may ask? The answer is EASY: I sell some of my fixed income holdings and use the proceeds to buy equities. Some folks call this Market Timing Rebalancing. I do this in a tax-deferred account which has both equity and fixed income investments.

Some recent "rebalancing" trades:
Equity (AVUV)
Image

Bond (BND):
Image

Do you see how no cash reserve is necessary?
Yes, this 100% makes sense! And also adds clarity, as I'm new to this, as to a better solution.
livesoft
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Re: Do index investors "Buy the Dip"?

Post by livesoft »

followtheplan wrote: Sat Feb 03, 2024 8:24 amI guess I'm asking: If there was some event where the market dropped 30% or more, would you be inclined to use cash you held elsewhere to take advantage of market at the time?
The answer is still No. That's because I do not hold any cash anywhere else. I would use my bond funds and DO use my bond funds.

It might be educational to review some old threads at bogleheads.org when the Stock Market did drop 30% or more. Can you tell me the dates and I can find and link some threads and discussions for you to read.
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followtheplan
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Re: Do index investors "Buy the Dip"?

Post by followtheplan »

bendix wrote: Sat Feb 03, 2024 8:21 am I think the underlying problem of your approach is: You are not Warren Buffett. If you were, you´d be foolish to follow the Boglehead approach. But let´s be real here. You´re not Warren Buffett and you wouldnt have his instinct and insights, so maybe his investment approach isnt right for you. If you realize you are not Warren Buffett but want to benefit from his expertise, you could buy BRK-B and be done with investing.
Yes, I'm definitely not the Oracle of Anywhere!
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Re: Do index investors "Buy the Dip"?

Post by muffins14 »

followtheplan wrote: Sat Feb 03, 2024 8:24 am I guess I should clarify that I'm not waiting for a dip.

I'm DCA my normal amount at my normal time.

I guess I'm asking: If there was some event where the market dropped 30% or more, would you be inclined to use cash you held elsewhere to take advantage of market at the time?
If you have cash elsewhere then you seem to be waiting for a dip, right?
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Re: Do index investors "Buy the Dip"?

Post by mikejuss »

I buy everything--and then, if I can, I buy some more. :beer
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followtheplan
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Re: Do index investors "Buy the Dip"?

Post by followtheplan »

livesoft wrote: Sat Feb 03, 2024 8:31 am
followtheplan wrote: Sat Feb 03, 2024 8:24 amI guess I'm asking: If there was some event where the market dropped 30% or more, would you be inclined to use cash you held elsewhere to take advantage of market at the time?
The answer is still No. That's because I do not hold any cash anywhere else. I would use my bond funds and DO use my bond funds.

It might be educational to review some old threads at bogleheads.org when the Stock Market did drop 30% or more. Can you tell me the dates and I can find and link some threads and discussions for you to read.
The most recent two over 30% that lasted longer that 1 month:


March 2000 to October 2002 31 months -49%
October 2007 to March 2009 17 months -56%

Source: https://www.forbes.com/advisor/investin ... t-history/
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Re: Do index investors "Buy the Dip"?

Post by followtheplan »

muffins14 wrote: Sat Feb 03, 2024 8:33 am
followtheplan wrote: Sat Feb 03, 2024 8:24 am I guess I should clarify that I'm not waiting for a dip.

I'm DCA my normal amount at my normal time.

I guess I'm asking: If there was some event where the market dropped 30% or more, would you be inclined to use cash you held elsewhere to take advantage of market at the time?
If you have cash elsewhere then you seem to be waiting for a dip, right?
No, this typically would be cash earmarked for other things. Any cash I use for investing is already earmarked for that purpose.
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Re: Do index investors "Buy the Dip"?

Post by muffins14 »

followtheplan wrote: Sat Feb 03, 2024 8:44 am
muffins14 wrote: Sat Feb 03, 2024 8:33 am
followtheplan wrote: Sat Feb 03, 2024 8:24 am I guess I should clarify that I'm not waiting for a dip.

I'm DCA my normal amount at my normal time.

I guess I'm asking: If there was some event where the market dropped 30% or more, would you be inclined to use cash you held elsewhere to take advantage of market at the time?
If you have cash elsewhere then you seem to be waiting for a dip, right?
No, this typically would be cash earmarked for other things. Any cash I use for investing is already earmarked for that purpose.
What’s an example of this, like cash saved for a roof repair, or a college fund, vacation?
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Re: Do index investors "Buy the Dip"?

Post by TimeIsYourFriend »

followtheplan wrote: Sat Feb 03, 2024 8:44 am
muffins14 wrote: Sat Feb 03, 2024 8:33 am
followtheplan wrote: Sat Feb 03, 2024 8:24 am I guess I should clarify that I'm not waiting for a dip.

I'm DCA my normal amount at my normal time.

I guess I'm asking: If there was some event where the market dropped 30% or more, would you be inclined to use cash you held elsewhere to take advantage of market at the time?
If you have cash elsewhere then you seem to be waiting for a dip, right?
No, this typically would be cash earmarked for other things. Any cash I use for investing is already earmarked for that purpose.
Is this beyond your untouchable portion of cash for job loss? What is the cash for?
"Time is your friend; impulse is your enemy." - John C. Bogle
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Re: Do index investors "Buy the Dip"?

Post by livesoft »

followtheplan wrote: Sat Feb 03, 2024 8:42 am March 2000 to October 2002 31 months -49%
October 2007 to March 2009 17 months -56%

Source: https://www.forbes.com/advisor/investin ... t-history/
Here's a thread from March 2020: viewtopic.php?t=307760

And the "Jitters" thread from 2011: viewtopic.php?t=79939
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Re: Do index investors "Buy the Dip"?

Post by followtheplan »

muffins14 wrote: Sat Feb 03, 2024 8:49 am
followtheplan wrote: Sat Feb 03, 2024 8:44 am
muffins14 wrote: Sat Feb 03, 2024 8:33 am
followtheplan wrote: Sat Feb 03, 2024 8:24 am I guess I should clarify that I'm not waiting for a dip.

I'm DCA my normal amount at my normal time.

I guess I'm asking: If there was some event where the market dropped 30% or more, would you be inclined to use cash you held elsewhere to take advantage of market at the time?
If you have cash elsewhere then you seem to be waiting for a dip, right?
No, this typically would be cash earmarked for other things. Any cash I use for investing is already earmarked for that purpose.
What’s an example of this, like cash saved for a roof repair, or a college fund, vacation?
It would be something like a roof fund, or car fund. Something that I'd either typically hold in a money market or CD ladder. I'm talking like sub $5000 type account that could be easily replenished in 6-9 months.
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Re: Do index investors "Buy the Dip"?

Post by followtheplan »

TimeIsYourFriend wrote: Sat Feb 03, 2024 8:55 am Is this beyond your untouchable portion of cash for job loss? What is the cash for?
See my last comment...
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Re: Do index investors "Buy the Dip"?

Post by followtheplan »

livesoft wrote: Sat Feb 03, 2024 8:56 am
followtheplan wrote: Sat Feb 03, 2024 8:42 am March 2000 to October 2002 31 months -49%
October 2007 to March 2009 17 months -56%

Source: https://www.forbes.com/advisor/investin ... t-history/
Here's a thread from March 2020: viewtopic.php?t=307760

And the "Jitters" thread from 2011: viewtopic.php?t=79939
Thanks! Off to read now!
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TimeIsYourFriend
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Re: Do index investors "Buy the Dip"?

Post by TimeIsYourFriend »

followtheplan wrote: Sat Feb 03, 2024 8:57 am
muffins14 wrote: Sat Feb 03, 2024 8:49 am
followtheplan wrote: Sat Feb 03, 2024 8:44 am
muffins14 wrote: Sat Feb 03, 2024 8:33 am
followtheplan wrote: Sat Feb 03, 2024 8:24 am I guess I should clarify that I'm not waiting for a dip.

I'm DCA my normal amount at my normal time.

I guess I'm asking: If there was some event where the market dropped 30% or more, would you be inclined to use cash you held elsewhere to take advantage of market at the time?
If you have cash elsewhere then you seem to be waiting for a dip, right?
No, this typically would be cash earmarked for other things. Any cash I use for investing is already earmarked for that purpose.
What’s an example of this, like cash saved for a roof repair, or a college fund, vacation?
It would be something like a roof fund, or car fund. Something that I'd either typically hold in a money market or CD ladder. I'm talking like sub $5000 type account that could be easily replenished in 6-9 months.
If you have other means of supporting yourself if you lose a job for many months and this is just for what you described: things that you can hold off doing, it seems fine. You know, if the market dropped 50% and I had some money for a car purchase but had a perfectly fine working car, I might delay the "want car not need" and buy into the market. But I wouldn't keep cash with only the expectation of buying dips and nothing else as that is, by the law averages, a losing proposition most likely.
"Time is your friend; impulse is your enemy." - John C. Bogle
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Re: Do index investors "Buy the Dip"?

Post by nisiprius »

They can if they want to. They don't need to if they don't want to. The Bogleheads' investment philosophy is not to try.

John C. Bogle once wrote--my underlining--
Pillar 2. When All Else Fails, Fall Back on Simplicity.

There are an infinite number of strategies worse than this one: Commit, over a period of a few years, half of your assets to a stock index fund and half to a bond index fund. Ignore interim fluctuations in their net asset values. Hold your positions for as long as you live, subject only to infrequent and marginal adjustments as your circumstances change. When there are multiple solutions to a problem, choose the simplest one.
The big problem with "buying the dip" is telling "what is a dip?"

We are tricked by memory, and by the limited time resolution of charts. Price movements are fractal: fluctuations within fluctuations within fluctuations. There are dips within every rise, and rises within the dips within the rise, and dips within the rises within the dips within the rise... at all time scales from decades down to seconds.

You think you know where the dip was after the fact, but if you actually try to write down mechanical rules to tell you when to buy, you will be amazed at how often they fail. If you decide in advance to buy when the market to decline -20% from some point, that capricious market is sure to decline -19%.

Image

The people who go in seriously for market timing always end up piling rule on rule on rule, because every combination of rules encounters market situations where it does something absurd, so they plaster on another rule that kicks in when that particular situation occurs.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
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Re: Do index investors "Buy the Dip"?

Post by TimeIsYourFriend »

nisiprius wrote: Sat Feb 03, 2024 9:09 am They can if they want to. They don't need to if they don't want to. The Bogleheads' investment philosophy is not to try.

John C. Bogle once wrote--my underlining--
Pillar 2. When All Else Fails, Fall Back on Simplicity.

There are an infinite number of strategies worse than this one: Commit, over a period of a few years, half of your assets to a stock index fund and half to a bond index fund. Ignore interim fluctuations in their net asset values. Hold your positions for as long as you live, subject only to infrequent and marginal adjustments as your circumstances change. When there are multiple solutions to a problem, choose the simplest one.
The big problem with "buying the dip" is telling "what is a dip?"

We are tricked by memory, and by the limited time resolution of charts. Price movements are fractal: fluctuations within fluctuations within fluctuations. There are dips within every rise, and rises within the dips within the rise, and dips within the rises within the dips within the rise... at all time scales from decades down to seconds.

You think you know where the dip was after the fact, but if you actually try to write down mechanical rules to tell you when to buy, you will be amazed at how often they fail. If you decide in advance to buy when the market to decline -20% from some point, that capricious market is sure to decline -19%.

Image

The people who go in seriously for market timing always end up piling rule on rule on rule, because every combination of rules encounters market situations where it does something absurd, so they plaster on another rule that kicks in when that particular situation occurs.
If you believe the market to generally go up over a long period of time, then using a decline from an all-time high as a metric to buy with this extra cash seems prudent. Like you insightfully point out though, someone's metric might be -20% and they see the market go down -19% but go up from there and now it's -15% dip and they feel like they are missing out on the dip and change their rules mid-stream. Why put yourself through that kind of headache and stress?
"Time is your friend; impulse is your enemy." - John C. Bogle
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Re: Do index investors "Buy the Dip"?

Post by CyclingDuo »

followtheplan wrote: Sat Feb 03, 2024 8:00 am To preface, I am a newish (just over a year) index investor that holds a 3 fund portfolio which I DCA into.

I'm currently reading the book "The Tao of Charlie Munger" and one of the stories in the book talks about Charlie & Warren Buffett having their own hedge fund.

At the time Warren thought everything was overvalued so he wasn't investing and held onto his cash. Charlie however kept investing, and then the market went south.

Warren, sitting on plenty of free capital, made his move. Charlie at the time, wasn't able to do that, and it was a big regret.

While it will be said that what I'm asking about is "timing the market", and I couldn't even try to counter those comments with a rebuttal, so I will state now, yes it IS timing the market.

With that said, do any of you keep a cash reserve to take advantage of times like these? If the market were to be down a large percentage* and you had the funds available, and God willing, the years (decades) to wait for a recovery do you have this worked into your investment plan?

*I'll also throw in the caveat of not knowing if the market could go down further than the point you'd buy in.
The majority of us have no choice but to use the strategy known as periodic investing throughout our accumulation years. Periodic investing is when a certain amount of each paycheck is invested into our workplace retirement plans into our chosen AA, or if you do after tax investing, it goes into our chosen taxable and Roth IRA accounts all on automatic pilot into our chosen AA. This means we are buying at lows, at highs, and everything in between along the way during our 30-40+ year working careers.

There are occasions that come along where a chunk of money such as a bonus, a windfall (usually an inheritance), or perhaps the sale of a property means there is a particular chunk of money to be invested. That's where the debate on DCA vs. lump sum may enter into the discussion. The most common scenario many of us face is that we wait until the turn of the year to max out our Roth IRAs all in one fell swoop. So that chunk of money faces the DCA vs. lump sum discussion to get it invested within the IRA. Most of us probably use the rip off the band aid and get it invested camp, but I'm sure there are others who pick a few days, weeks, or months to linger and buy using their version of DCA.

Plenty of articles, blogs, websites with data showing buying at highs vs. buying at lows to help you decide. Here is an example:

https://awealthofcommonsense.com/2020/1 ... ket-peaks/
https://awealthofcommonsense.com/2014/0 ... ket-timer/

Here is another about Tiffany, Brittany, and Sarah that is interesting:

https://www.personalfinanceclub.com/how ... he-market/

Hopefully, the articles and video will help you focus on the eventual outcome of periodic investing compared to market timing.

CyclingDuo
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Re: Do index investors "Buy the Dip"?

Post by H-Town »

followtheplan wrote: Sat Feb 03, 2024 8:24 am I guess I should clarify that I'm not waiting for a dip.

I'm DCA my normal amount at my normal time.

I guess I'm asking: If there was some event where the market dropped 30% or more, would you be inclined to use cash you held elsewhere to take advantage of market at the time?
Absolutely yes!

I typically do what I call “double dip”. I TLH and then buy more of the replacement fund/ETF. I know many bogleheads are very resourceful at this.
Time is the ultimate currency.
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Re: Do index investors "Buy the Dip"?

Post by hardrain »

followtheplan wrote: Sat Feb 03, 2024 8:24 am I guess I should clarify that I'm not waiting for a dip.

I'm DCA my normal amount at my normal time.

I guess I'm asking: If there was some event where the market dropped 30% or more, would you be inclined to use cash you held elsewhere to take advantage of market at the time?
I think as has kind of been said - if you’re doing the simple boglehead thesis this type of cash shouldn’t exist.

If you have a car or roof fund sitting around, that with some bad market news you can afford to put into the market and hold those shares for 10-20+ years, you’re not doing your car or roof fund correctly :). Because now you either can’t afford to do your roof, or you still can afford to do your roof in which case what was that original cash doing sitting around?
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Re: Do index investors "Buy the Dip"?

Post by goblue100 »

We feel good when we can buy something on sale, provided we can muster the courage to actually act when things are going poorly. But if we really hold cash, for say 3 or 4 years while waiting for the sale, we will likely find that our sale price is more than the entry point would have been 3 or 4 years ago.
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Re: Do index investors "Buy the Dip"?

Post by followtheplan »

hardrain wrote: Sat Feb 03, 2024 9:42 am
followtheplan wrote: Sat Feb 03, 2024 8:24 am I guess I should clarify that I'm not waiting for a dip.

I'm DCA my normal amount at my normal time.

I guess I'm asking: If there was some event where the market dropped 30% or more, would you be inclined to use cash you held elsewhere to take advantage of market at the time?
I think as has kind of been said - if you’re doing the simple boglehead thesis this type of cash shouldn’t exist.

If you have a car or roof fund sitting around, that with some bad market news you can afford to put into the market and hold those shares for 10-20+ years, you’re not doing your car or roof fund correctly :). Because now you either can’t afford to do your roof, or you still can afford to do your roof in which case what was that original cash doing sitting around?
Touché! :D Let's say you're at $8,000 into saving $10,000 for a roof, would taking out and investing $1,000 of that if the market was down 30% put you much behind schedule?
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Re: Do index investors "Buy the Dip"?

Post by followtheplan »

CyclingDuo wrote: Sat Feb 03, 2024 9:28 am
Appreciate the links!
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Re: Do index investors "Buy the Dip"?

Post by RadAudit »

I guess I do. I'm invested in two mutual funds with an asset allocation of 60/40 and 40/60. So they rebalance on the way up and down. So, yes. I buy the dips and sell the rips.

Of course, I do that in tax deferred accounts which are the bulk of my investments.
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Chv396
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Re: Do index investors "Buy the Dip"?

Post by Chv396 »

I keep some cash in MMF’s to buy ETF’s when the market dips. My spouse and I usually will buy after a 15% decline, from the peak, of the S&P 500 index.

Your mileage may vary.
“Stay the Course” - My Portfolio (BND, VT, VXUS), Spouse’s Portfolio (VEA, VGSH, VOO, VOT)
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tetractys
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Re: Do index investors "Buy the Dip"?

Post by tetractys »

followtheplan wrote: Sat Feb 03, 2024 8:00 amWhile it will be said that what I'm asking about is "timing the market", and I couldn't even try to counter those comments with a rebuttal, so I will state now, yes it IS timing the market.

With that said, do any of you keep a cash reserve to take advantage of times like these? If the market were to be down a large percentage* and you had the funds available, and God willing, the years (decades) to wait for a recovery do you have this worked into your investment plan?
Functionally “buying the dips” can be done by rebalancing a portfolio, and a multi-asset portfolio of bonds and stocks offsets the need for a large cash holding. For example when market forces have changed a 50/50 portfolio to 60/40, rebalancing back to 50/50 would be buying low and selling high. However considering all possible circumstances it could be argued this may not be buying low and selling high, and also whether or not it is “timing the market.”
gavinsiu
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Re: Do index investors "Buy the Dip"?

Post by gavinsiu »

Generally buying the dip usually do not work. Let’s say
you hold a lot of cash to buy the dip, the stock market rise more than fall so you are better off having more of the money in the stock market than earning a low return from cash.

Most of us can buy the dip by maximizing our return in our 401k.

I don’t think I can invest like Warren buffet. I don’t think most people can either.
KPG
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Re: Do index investors "Buy the Dip"?

Post by KPG »

livesoft wrote: Sat Feb 03, 2024 8:22 am
No,I do not keep a cash reserve to take advantage of buying equities lower. Nevertheless, I do buy equities lower. How is this possible you may ask? The answer is EASY: I sell some of my fixed income holdings and use the proceeds to buy equities. Some folks call this Market Timing Rebalancing. I do this in a tax-deferred account which has both equity and fixed income investments.

So my "Fixed Income" that I thought would be there, is down $95000. On your recent transaction in Total Bond, isn't your Total Bond at a loss and do you still sell it to Rebalance? KPG
livesoft
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Re: Do index investors "Buy the Dip"?

Post by livesoft »

KPG wrote: Sat Feb 03, 2024 11:09 amSo my "Fixed Income" that I thought would be there, is down $95000. On your recent transaction in Total Bond, isn't your Total Bond at a loss and do you still sell it to Rebalance? KPG
Definitely, yes. I have no fear selling losers. If you look at the screen captures, you will see that I avoided a further 1% loss in BND by selling on 2/1 and rebuying on 2/2. Lucky me! Of course, we don't know what will happen next week, do we?

Edit: Actually, most of the BND shares I sold were purchased in January 2024 at prices of $72.77 to $73.255, so I actually sold them at a gain and not at a loss, plus I got a dividend of $0.21188 for the shares as well.

More about those trades: It turns out that AVUV does not drop more than 2.5% in a single day very often, so when it does, then it is usually (not always!) a good day to buy it. Also BND usually doesn't drop 1% in a single day, so when it does, then it is usually (not always!) a good day to buy it. Not shown in my screen captures is where I got the money to buy BND when it dropped 1%, so I will tell you: I sold something that went up 1% the same day, specifically VTI (Total US Stock Market) which is up 3.36% YTD. Note: VTI closed up 0.86%, but it dropped in price in the afternoon after I sold some shares at higher prices than the closing price.
Last edited by livesoft on Sat Feb 03, 2024 1:16 pm, edited 1 time in total.
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DesertGator
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Re: Do index investors "Buy the Dip"?

Post by DesertGator »

followtheplan wrote: Sat Feb 03, 2024 8:24 am I guess I should clarify that I'm not waiting for a dip.

I'm DCA my normal amount at my normal time.

I guess I'm asking: If there was some event where the market dropped 30% or more, would you be inclined to use cash you held elsewhere to take advantage of market at the time?
I hope that I don't have unallocated cash sitting "elsewhere" such that in the event of the inevitable big "dips" that occur, I have stagnant money that now looks good to put there.

Another way to say this is that always sitting on some "dry powder" (boy do people love that term), waiting for a micro-market timing event means you always have to have $x not invested. That seems dumb to me.

If you believe that DCA is a good strategy, and that marketing timing is a poor strategy, you can't logically like the idea of buying the dips with idle standby cash.
carminered2019
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Re: Do index investors "Buy the Dip"?

Post by carminered2019 »

No for monthly contributions, yes for big amount like 500K+ in a bear market or go from 70/30 to 95/5 and I have the tendency to go all-in if the markets drop 30-50 %. Up about 32X of living expenses since beginning of Covid with no new contribution.
Last edited by carminered2019 on Sat Feb 03, 2024 2:22 pm, edited 2 times in total.
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SB1234
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Re: Do index investors "Buy the Dip"?

Post by SB1234 »

livesoft wrote: Sat Feb 03, 2024 1:03 pm
KPG wrote: Sat Feb 03, 2024 11:09 amSo my "Fixed Income" that I thought would be there, is down $95000. On your recent transaction in Total Bond, isn't your Total Bond at a loss and do you still sell it to Rebalance? KPG
Definitely, yes. I have no fear selling losers. If you look at the screen captures, you will see that I avoided a further 1% loss in BND by selling on 2/1 and rebuying on 2/2. Lucky me! Of course, we don't know what will happen next week, do we?

Edit: Actually, most of the BND shares I sold were purchased in January 2024 at prices of $72.77 to $73.255, so I actually sold them at a gain and not at a loss, plus I got a dividend of $0.21188 for the shares as well.

More about those trades: It turns out that AVUV does not drop more than 2.5% in a single day very often, so when it does, then it is usually (not always!) a good day to buy it. Also BND usually doesn't drop 1% in a single day, so when it does, then it is usually (not always!) a good day to buy it. Not shown in my screen captures is where I got the money to buy BND when it dropped 1%, so I will tell you: I sold something that went up 1% the same day, specifically VTI (Total US Stock Market) which is up 3.36% YTD. Note: VTI closed up 0.86%, but it dropped in price in the afternoon after I sold some shares at higher prices than the closing price.
Do you keep monitoring the market all day for opportunities? Or is there some triggers that notify you?
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Hyperchicken
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Re: Do index investors "Buy the Dip"?

Post by Hyperchicken »

Buy the dip? Sure!

Buy the top too.

And everything in between.
Northern Flicker
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Re: Do index investors "Buy the Dip"?

Post by Northern Flicker »

Regular contributions and rebalancing are the strategies for "buying the dip".
livesoft
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Re: Do index investors "Buy the Dip"?

Post by livesoft »

SB1234 wrote: Sat Feb 03, 2024 1:20 pm Do you keep monitoring the market all day for opportunities? Or is there some triggers that notify you?
Asking for friend.
I have set some alerts at my brokerages for both BND and AVUV. Examples of what gets sent to my e-mail:
TD Ameritrade - Securities Alert
Delivered by Markit On Demand
Fri Feb 2 2024 9:30:00 AM EST

Net change falls $0.35 from prior close
Alert Triggered for Avantis US Small Cap Value ETF
AVUV decreased -2.57% today and is currently trading at $87.35.
And just because I get alerts sent to me does not mean I am forced to act on them. Sometimes I have been out backpacking and they didn't reach my phone until days later, too.
Last edited by livesoft on Sat Feb 03, 2024 1:50 pm, edited 1 time in total.
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KPG
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Re: Do index investors "Buy the Dip"?

Post by KPG »

livesoft,
Thankyou for the clarification. KPG
BalancedJCB19
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Re: Do index investors "Buy the Dip"?

Post by BalancedJCB19 »

I don't because I don't even know what the market is doing. I truly ignore it.
BalancedJCB19
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Re: Do index investors "Buy the Dip"?

Post by BalancedJCB19 »

I don't because I don't even know what the market is doing. I truly ignore it.
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ruralavalon
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Re: Do index investors "Buy the Dip"?

Post by ruralavalon »

followtheplan wrote: Sat Feb 03, 2024 8:00 am To preface, I am a newish (just over a year) index investor that holds a 3 fund portfolio which I DCA into.

I'm currently reading the book "The Tao of Charlie Munger" and one of the stories in the book talks about Charlie & Warren Buffett having their own hedge fund.

At the time Warren thought everything was overvalued so he wasn't investing and held onto his cash. Charlie however kept investing, and then the market went south.

Warren, sitting on plenty of free capital, made his move. Charlie at the time, wasn't able to do that, and it was a big regret.

While it will be said that what I'm asking about is "timing the market", and I couldn't even try to counter those comments with a rebuttal, so I will state now, yes it IS timing the market.

With that said, do any of you keep a cash reserve to take advantage of times like these? If the market were to be down a large percentage* and you had the funds available, and God willing, the years (decades) to wait for a recovery do you have this worked into your investment plan?

*I'll also throw in the caveat of not knowing if the market could go down further than the point you'd buy in.
I don't "buy the dip", I don't hold any cash reserve in order to be able to buy when stocks are down.

It has always been my policy to buy whenever I had extra money available for investing.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
mikejuss
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Re: Do index investors "Buy the Dip"?

Post by mikejuss »

ruralavalon wrote: Sat Feb 03, 2024 2:03 pm
followtheplan wrote: Sat Feb 03, 2024 8:00 am To preface, I am a newish (just over a year) index investor that holds a 3 fund portfolio which I DCA into.

I'm currently reading the book "The Tao of Charlie Munger" and one of the stories in the book talks about Charlie & Warren Buffett having their own hedge fund.

At the time Warren thought everything was overvalued so he wasn't investing and held onto his cash. Charlie however kept investing, and then the market went south.

Warren, sitting on plenty of free capital, made his move. Charlie at the time, wasn't able to do that, and it was a big regret.

While it will be said that what I'm asking about is "timing the market", and I couldn't even try to counter those comments with a rebuttal, so I will state now, yes it IS timing the market.

With that said, do any of you keep a cash reserve to take advantage of times like these? If the market were to be down a large percentage* and you had the funds available, and God willing, the years (decades) to wait for a recovery do you have this worked into your investment plan?

*I'll also throw in the caveat of not knowing if the market could go down further than the point you'd buy in.
I don't "buy the dip", I don't hold any cash reserve in order to be able to buy when stocks are down.

It has always been my policy to buy whenever I had extra money available for investing.
In line with the old adage, "When should I buy? When you have the money. When should I sell? When you need the money."
50% VTSAX | 25% VTIAX | 25% VTEAX (taxable), 25% VBTLX (retirement)
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followtheplan
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Re: Do index investors "Buy the Dip"?

Post by followtheplan »

DesertGator wrote: Sat Feb 03, 2024 1:12 pm If you believe that DCA is a good strategy, and that marketing timing is a poor strategy, you can't logically like the idea of buying the dips with idle standby cash.
I mentioned in another comment, I don't have money earmarked for this purpose.

But, If I have $8,000 (of $10,000) in a HYSA for a new roof and there was a massive drop in the market, Could it make sense to take a portion of that and buy when the market was down?
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