Why should I be investing in a down or downing market for retirement?

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zetsui
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Why should I be investing in a down or downing market for retirement?

Post by zetsui »

I guess age is a factor here, but let's say young and old, why and why wouldn't i be investing in a downing or soon to precipitate market (i realize market can't be timed but if the average bull market is 6.5 years and we're going on 12 I think it's pretty safe to assume one is closeby for an older person who may need it for retirement. We're talking 1.5+ standard deviations here)


If I had invested in 2007 and the market dropped, why would I invest more money? The indeces show negative returns for that year. once a major recession is underway and the indeces are likely to be negative for the year, the growth in my porfolio does NOT exceed the returns for that year. So why would I put MORE moeny into it?

the two cases im considering are me 1) 30 some who has time to reover and 2) my father who is nearly 70 now and doesn't have time to recover but can use growth in his account
Last edited by zetsui on Fri Sep 04, 2020 12:41 pm, edited 2 times in total.
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Re: Why should I be investing in a down or downing market for retirement?

Post by 000 »

Down markets are the best time to buy because the prices are lowest.

The annual returns don't matter, only the returns from the purchase date to the sale date.
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Re: Why should I be investing in a down or downing market for retirement?

Post by FiveK »

Perhaps because you will likely do better than the world’s worst market timer, and even he did OK.
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Re: Why should I be investing in a down or downing market for retirement?

Post by minimalistmarc »

Didn’t this bull market start in March 2020?
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Re: Why should I be investing in a down or downing market for retirement?

Post by nisiprius »

Because our mental models of stock market movements are bad, and we fool ourselves by thinking we know the dominant trend of the market when we actually don't.
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zetsui
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Re: Why should I be investing in a down or downing market for retirement?

Post by zetsui »

000 wrote: Fri Sep 04, 2020 12:20 pm Down markets are the best time to buy because the prices are lowest.

The annual returns don't matter, only the returns from the purchase date to the sale date.
I guess what I'm saying is regularly investing. Like every paycheck or every month. Or are you hinting at 'timing'?
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Re: Why should I be investing in a down or downing market for retirement?

Post by delamer »

Because investing in the stock market should only be done for the long-term, and so you shouldn’t be making decisions about stock investing based on short-term market conditions.

For someone like your father, he should have at least 5 years of expenses in cash. Then he won’t need to worry about “selling low” if the stock market drops. He can wait out almost any recession/downturn, and benefit from the long-term superior return of stocks in the rest of his portfolio.
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Re: Why should I be investing in a down or downing market for retirement?

Post by 000 »

zetsui wrote: Fri Sep 04, 2020 12:42 pm
000 wrote: Fri Sep 04, 2020 12:20 pm Down markets are the best time to buy because the prices are lowest.

The annual returns don't matter, only the returns from the purchase date to the sale date.
I guess what I'm saying is regularly investing. Like every paycheck or every month. Or are you hinting at 'timing'?
No, not really hinting at timing. Your post seemed to imply you would stop investing new money during a down market. Did I misunderstand?
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Re: Why should I be investing in a down or downing market for retirement?

Post by mega317 »

zetsui wrote: Fri Sep 04, 2020 12:18 pm If I had invested in 2007 and the market dropped, why would I invest more money? The indeces show negative returns for that year. once a major recession is underway and the indeces are likely to be negative for the year,
You are using year end as an artificial mile post. What if stocks dropped by 50% from Jan 1 to a low point during the year, then recovered 99% of what it lost before Dec 31? It's "negative for the year" but if you stopped investing at any point on the way down you missed tons of positive returns.

But the real answer to "why would I invest more money" is the same as the answer to "why did you invest in the first place" whatever that answer may be.
zetsui wrote: Fri Sep 04, 2020 12:18 pm (i realize market can't be timed but
You should have stopped yourself right there. There is no but, it can't be timed.
https://www.bogleheads.org/forum/viewtopic.php?t=6212
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Re: Why should I be investing in a down or downing market for retirement?

Post by sperry8 »

You're looking at this too granularly. Markets have returned ~10% per year on average. That's 17% returns in Bull markets and -6% in bear markets. One never knows which one we are in - but over the long haul markets have returned ~10%. One cannot miss the bull market and expect to gain the average returns over time. So for a 30 year old - you absolutely invest. By the time you need the money (35 years+) where do you expect markets to be? Up, flat, or down? I'd say up, and up dramatically. If you agree, then invest. We are either in a bull or bear right now. No one knows (nor do you). All you can do is enter and let the magic of compound interest work its magic over the next 35 years.

I invested in July 2007 in one lump sum (from a windfall). Worst timing ever right? I mean, had I waited just a little bit, could've bought very low. Didn't happen. Meanwhile - my portfolio has done just fine.

As for your 70 year old father - that is a different case. He likely does not have 35 years. Since he does not, his AA should be very different than yours.
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zetsui
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Re: Why should I be investing in a down or downing market for retirement?

Post by zetsui »

mega317 wrote: Fri Sep 04, 2020 12:46 pm
zetsui wrote: Fri Sep 04, 2020 12:18 pm If I had invested in 2007 and the market dropped, why would I invest more money? The indeces show negative returns for that year. once a major recession is underway and the indeces are likely to be negative for the year,
You are using year end as an artificial mile post. What if stocks dropped by 50% from Jan 1 to a low point during the year, then recovered 99% of what it lost before Dec 31? It's "negative for the year" but if you stopped investing at any point on the way down you missed tons of positive returns.

But the real answer to "why would I invest more money" is the same as the answer to "why did you invest in the first place" whatever that answer may be.
zetsui wrote: Fri Sep 04, 2020 12:18 pm (i realize market can't be timed but
You should have stopped yourself right there. There is no but, it can't be timed.
So let's continue to use this example of 2007. 2007 I am looking at Macroeconomic indicators that are terrible. I 'pull out' before the downslide or during the early phase of the recession. I think to myself 'most recessions in the last 40 years have average a 35%+ drop I will jump back in then'

What 'growth' am i missing for that year?

What 'growth' am I getting if I just stayed in all 2007, or just kept cutting half my paycheck towards the market?

Some numbers here for context would help clear my confusion. Thank you!
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Re: Why should I be investing in a down or downing market for retirement?

Post by BrooklynInvest »

1. I don't know when the market will go up, down or sideways

2. My asset allocation solved for this at 30 and will solve for it at 70... y'know, assuming
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Re: Why should I be investing in a down or downing market for retirement?

Post by mega317 »

zetsui wrote: Fri Sep 04, 2020 1:01 pm So let's continue to use this example of 2007. 2007 I am looking at Macroeconomic indicators that are terrible. I 'pull out' before the downslide or during the early phase of the recession. I think to myself 'most recessions in the last 40 years have average a 35%+ drop I will jump back in then'

What 'growth' am i missing for that year?

What 'growth' am I getting if I just stayed in all 2007, or just kept cutting half my paycheck towards the market?

Some numbers here for context would help clear my confusion. Thank you!
Numbers are going to muddy not clarify this. As you said yourself, you can't time the market. The entire rest of this thread is a waste of your energy if you actually believe that.

1. I don't know what you mean by macroeconomic indicators but things were very dicey in real estate back to at least 2006. So if you got out then you missed something like 10-15% before the stock market crashed.
2. What on earth makes you think you can pull out before the downslide?
3. I'll take your word that an average drop is 35% That means some drop less than that. Do you wait until 35% and if never gets that low you just stay out indefinitely?
4. If you stayed in all of 2007 you missed the fact that since the very peak, stocks have more than doubled.
https://www.bogleheads.org/forum/viewtopic.php?t=6212
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zetsui
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Re: Why should I be investing in a down or downing market for retirement?

Post by zetsui »

BrooklynInvest wrote: Fri Sep 04, 2020 1:03 pm 1. I don't know when the market will go up, down or sideways

2. My asset allocation solved for this at 30 and will solve for it at 70... y'know, assuming
great point. and one that is much clearer a propostition at younger age, but if you are like my father at 70 who needs growth, murkier situation.
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Re: Why should I be investing in a down or downing market for retirement?

Post by bloom2708 »

Those that got out in March and/or stopped contributing in March understand why you just keep investing.

You put the "personal" in personal finance. That is the great thing, you can try your ideas and see how they work.
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Re: Why should I be investing in a down or downing market for retirement?

Post by clown »

A 30 year old should be thrilled with down markets because they can buy more shares for the same number of dollars. The shares will be worth more in 35 years than today.

A 70 year old, on the other hand, is in a completely different situation. As has been mentioned earlier in this thread, the 70 year old with 5 years portfolio withdrawals in cash can ride out most market retreats without having to sell securities.

Different strokes for different folks.
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Re: Why should I be investing in a down or downing market for retirement?

Post by flaccidsteele »

If diversification is a free lunch, buying during a bear is a free dinner
The US market always recovers. It’s never different this time. Retired in my 40s. Investing is a simple game of rinse and repeat
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Re: Why should I be investing in a down or downing market for retirement?

Post by BarbBrooklyn »

zetsui wrote: Fri Sep 04, 2020 1:12 pm
BrooklynInvest wrote: Fri Sep 04, 2020 1:03 pm 1. I don't know when the market will go up, down or sideways

2. My asset allocation solved for this at 30 and will solve for it at 70... y'know, assuming
great point. and one that is much clearer a propostition at younger age, but if you are like my father at 70 who needs growth, murkier situation.
Your dad needs to determine his comfortable asset allocation. Is he still working?

Take a look at Rick Ferri for ideas about cofortabke AA for retirees. We are at 30/70 and still get growth.
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Re: Why should I be investing in a down or downing market for retirement?

Post by arcticpineapplecorp. »

zetsui wrote: Fri Sep 04, 2020 12:42 pm
000 wrote: Fri Sep 04, 2020 12:20 pm Down markets are the best time to buy because the prices are lowest.

The annual returns don't matter, only the returns from the purchase date to the sale date.
I guess what I'm saying is regularly investing. Like every paycheck or every month. Or are you hinting at 'timing'?
the best time to invest is when you have the money, otherwise you're market timing pure and simple.

regarding a retiree...they're not adding money to the market like the 30 year old are they? (except for reinvestment of dividends).

You're saying no growth for a retiree, but they're getting dividends from stocks and bonds.

they presumably know their safe withdrawal rate.

they might be able to take less amount overall (or none) from their investments for a certain time while the market's down to allow it to recover faster and/or not overwhelm the portfolio with withdrawals on top of drawdowns.

they might be able to draw from bonds rather than stocks in retirement (if one has 50/50 stocks and bonds which should presumably last 30 years, and the stocks drop 50% there should still be 15 years worth of bonds to draw from while they wait for the stocks to recover).

Q: When should I buy?
A: When you have the money.

Q: When should I sell?
A: When you need the money.
It's "Stay" the course, not Stray the Course. Buy and Hold works. You should really try it sometime. Get a plan: www.bogleheads.org/wiki/Investment_policy_statement
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Re: Why should I be investing in a down or downing market for retirement?

Post by Brianmcg321 »

buy low, sell high. Its pretty much the most basic principle of investing.
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Re: Why should I be investing in a down or downing market for retirement?

Post by rascott »

zetsui wrote: Fri Sep 04, 2020 1:01 pm
mega317 wrote: Fri Sep 04, 2020 12:46 pm
zetsui wrote: Fri Sep 04, 2020 12:18 pm If I had invested in 2007 and the market dropped, why would I invest more money? The indeces show negative returns for that year. once a major recession is underway and the indeces are likely to be negative for the year,
You are using year end as an artificial mile post. What if stocks dropped by 50% from Jan 1 to a low point during the year, then recovered 99% of what it lost before Dec 31? It's "negative for the year" but if you stopped investing at any point on the way down you missed tons of positive returns.

But the real answer to "why would I invest more money" is the same as the answer to "why did you invest in the first place" whatever that answer may be.
zetsui wrote: Fri Sep 04, 2020 12:18 pm (i realize market can't be timed but
You should have stopped yourself right there. There is no but, it can't be timed.
So let's continue to use this example of 2007. 2007 I am looking at Macroeconomic indicators that are terrible. I 'pull out' before the downslide or during the early phase of the recession. I think to myself 'most recessions in the last 40 years have average a 35%+ drop I will jump back in then'

What 'growth' am i missing for that year?

What 'growth' am I getting if I just stayed in all 2007, or just kept cutting half my paycheck towards the market?

Some numbers here for context would help clear my confusion. Thank you!


If you can read the macroeconomic tea leaves in 2007 (or any other recession) so well..... you need to quit your day job immediately and open a hedge fund. You'll be a billionaire in a matter of a decade. Like "The Big Short" part 2.

If you're just a mere mortal like the rest of us.. that actually lived through that period while investing.... you'd know that it's about 100000% harder than you are making it out to be.

You don't get to invest in the rear view mirror.
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Re: Why should I be investing in a down or downing market for retirement?

Post by Dottie57 »

000 wrote: Fri Sep 04, 2020 12:20 pm Down markets are the best time to buy because the prices are lowest.

The annual returns don't matter, only the returns from the purchase date to the sale date.
+1. The great recession made my retirement. You should want to nuy stocks when they are down.
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Re: Why should I be investing in a down or downing market for retirement?

Post by abuss368 »

All markets are as good of a time to buy as any! Focus on looking for ways to increase your savings rate every year.
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Re: Why should I be investing in a down or downing market for retirement?

Post by abuss368 »

minimalistmarc wrote: Fri Sep 04, 2020 12:23 pm Didn’t this bull market start in March 2020?
Did the bull market ever end?🤣
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Re: Why should I be investing in a down or downing market for retirement?

Post by zetsui »

abuss368 wrote: Fri Sep 04, 2020 5:58 pm All markets are as good of a time to buy as any! Focus on looking for ways to increase your savings rate every year.
great advice
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Re: Why should I be investing in a down or downing market for retirement?

Post by Fortune Seeker »

Brianmcg321 wrote: Fri Sep 04, 2020 4:49 pm buy low, sell high. Its pretty much the most basic principle of investing.
It's a great principle but there's a teeny tiny problem with it: you don't know if you are buying high or low.

That's why the strategy is to ignore volatility for 20-30 years and buy methodically (like every month or every quarter). Then you are guaranteed to "buy average" and "sell average", and average price several decades later will very likely be higher due to fundamental returns on stocks.
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Re: Why should I be investing in a down or downing market for retirement?

Post by firebirdparts »

zetsui wrote: Fri Sep 04, 2020 12:18 pm I think it's pretty safe to assume one is closeby
Good luck with that Crystal ball stuff. That's not how it's done. You could be 100% right, and say "a crash is coming soon" and be right, but the market may still double before that crash actually comes, and then drop back 30%, and never again be as low as it was when you were right.

You must invest. Invest in something you're pretty sure is going to be okay if the world suddenly acts like the world.
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Re: Why should I be investing in a down or downing market for retirement?

Post by MotoTrojan »

Last I checked we are still in the 1st year of the current bull market, if you want to use arbitrary figures like average length of bull markets.
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Re: Why should I be investing in a down or downing market for retirement?

Post by abuss368 »

zetsui wrote: Fri Sep 04, 2020 6:20 pm
abuss368 wrote: Fri Sep 04, 2020 5:58 pm All markets are as good of a time to buy as any! Focus on looking for ways to increase your savings rate every year.
great advice
Thanks. I learned that over many years. Before that I was asking the same questions you are.
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Re: Why should I be investing in a down or downing market for retirement?

Post by Brianmcg321 »

Fortune Seeker wrote: Fri Sep 04, 2020 6:41 pm
Brianmcg321 wrote: Fri Sep 04, 2020 4:49 pm buy low, sell high. Its pretty much the most basic principle of investing.
It's a great principle but there's a teeny tiny problem with it: you don't know if you are buying high or low.

That's why the strategy is to ignore volatility for 20-30 years and buy methodically (like every month or every quarter). Then you are guaranteed to "buy average" and "sell average", and average price several decades later will very likely be higher due to fundamental returns on stocks.
Every time I buy, its low. It will be sooner or later.
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Re: Why should I be investing in a down or downing market for retirement?

Post by Afty »

zetsui wrote: Fri Sep 04, 2020 12:18 pm I guess age is a factor here, but let's say young and old, why and why wouldn't i be investing in a downing or soon to precipitate market (i realize market can't be timed but if the average bull market is 6.5 years and we're going on 12 I think it's pretty safe to assume one is closeby for an older person who may need it for retirement. We're talking 1.5+ standard deviations here)
You wrote that you understand the market cannot be timed, but then you propose timing the market. It’s important to understand that, however you feel about the market, whatever people (even smart people, even Nobel Prize winners) are saying, no one really knows what is going to happen.

I’d also point out that we’re not in a 12 year bull market. We’ve had several large pullbacks, most recently in March when the market lost >25% of its value. A 20% drop constitutes a bear market, per Investopedia.
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Re: Why should I be investing in a down or downing market for retirement?

Post by phantom0308 »

Echoing people saying that the current bull market is only 5 months old or so. There was definitely a bear market in March according to nearly every source / metric.
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Re: Why should I be investing in a down or downing market for retirement?

Post by zetsui »

Afty wrote: Fri Sep 04, 2020 7:38 pm
zetsui wrote: Fri Sep 04, 2020 12:18 pm I guess age is a factor here, but let's say young and old, why and why wouldn't i be investing in a downing or soon to precipitate market (i realize market can't be timed but if the average bull market is 6.5 years and we're going on 12 I think it's pretty safe to assume one is closeby for an older person who may need it for retirement. We're talking 1.5+ standard deviations here)
You wrote that you understand the market cannot be timed, but then you propose timing the market. It’s important to understand that, however you feel about the market, whatever people (even smart people, even Nobel Prize winners) are saying, no one really knows what is going to happen.

I’d also point out that we’re not in a 12 year bull market. We’ve had several large pullbacks, most recently in March when the market lost >25% of its value. A 20% drop constitutes a bear market, per Investopedia.

the onyl reason i propose it is my father did a pretty bad job of investing what cash he does...so i am a lot more about conserving capital for now than I am upside.
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Re: Why should I be investing in a down or downing market for retirement?

Post by flaccidsteele »

Brianmcg321 wrote: Fri Sep 04, 2020 7:20 pm
Fortune Seeker wrote: Fri Sep 04, 2020 6:41 pm
Brianmcg321 wrote: Fri Sep 04, 2020 4:49 pm buy low, sell high. Its pretty much the most basic principle of investing.
It's a great principle but there's a teeny tiny problem with it: you don't know if you are buying high or low.

That's why the strategy is to ignore volatility for 20-30 years and buy methodically (like every month or every quarter). Then you are guaranteed to "buy average" and "sell average", and average price several decades later will very likely be higher due to fundamental returns on stocks.
Every time I buy, its low. It will be sooner or later.
+1 ^ this

The US market will always hit a new all-time highs

Always buy. Buy more during bears

Simple
The US market always recovers. It’s never different this time. Retired in my 40s. Investing is a simple game of rinse and repeat
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Re: Why should I be investing in a down or downing market for retirement?

Post by marcopolo »

zetsui wrote: Fri Sep 04, 2020 12:18 pm I guess age is a factor here, but let's say young and old, why and why wouldn't i be investing in a downing or soon to precipitate market (i realize market can't be timed but if the average bull market is 6.5 years and we're going on 12 I think it's pretty safe to assume one is closeby for an older person who may need it for retirement. We're talking 1.5+ standard deviations here)


If I had invested in 2007 and the market dropped, why would I invest more money? The indeces show negative returns for that year. once a major recession is underway and the indeces are likely to be negative for the year, the growth in my porfolio does NOT exceed the returns for that year. So why would I put MORE moeny into it?

the two cases im considering are me 1) 30 some who has time to reover and 2) my father who is nearly 70 now and doesn't have time to recover but can use growth in his account
Despite your statement bolded above, it does not appear that you realize this.

Why do so many people looking for market timing assurances feel the need to preface their rationalizations with such declarations?
Once in a while you get shown the light, in the strangest of places if you look at it right.
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Re: Why should I be investing in a down or downing market for retirement?

Post by mega317 »

Brianmcg321 wrote: Fri Sep 04, 2020 4:49 pm buy low, sell high. Its pretty much the most basic principle of investing.
It's not a principle, more like a platitude. How do you propose one execute that strategy?
Buy and hold is what you're looking for and it can be understood and practiced by anyone with even the most basic knowledge of investing.
marcopolo wrote: Fri Sep 04, 2020 10:55 pm Why do so many people looking for market timing assurances feel the need to preface their rationalizations with such declarations?
Makes no sense to me at all.
https://www.bogleheads.org/forum/viewtopic.php?t=6212
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Re: Why should I be investing in a down or downing market for retirement?

Post by zetsui »

mega317 wrote: Sat Sep 05, 2020 2:49 pm
Brianmcg321 wrote: Fri Sep 04, 2020 4:49 pm buy low, sell high. Its pretty much the most basic principle of investing.
It's not a principle, more like a platitude. How do you propose one execute that strategy?
Buy and hold is what you're looking for and it can be understood and practiced by anyone with even the most basic knowledge of investing.
marcopolo wrote: Fri Sep 04, 2020 10:55 pm Why do so many people looking for market timing assurances feel the need to preface their rationalizations with such declarations?
Makes no sense to me at all.
if you are a retiree like my fathre buying 'low' means waiting for a down market to buy. he doesn't have 30 years to recover and needs that money for retimrent

I think what peple mean to say is...the market will always go up over 20+ year windows so you are buying low now, just invest regularly.
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Re: Why should I be investing in a down or downing market for retirement?

Post by mega317 »

zetsui wrote: Mon Sep 07, 2020 3:40 pm if you are a retiree like my fathre buying 'low' means waiting for a down market to buy. he doesn't have 30 years to recover and needs that money for retimrent
This is a terrible idea. Looking past the fact that "low" and "down market" are useless concepts, what happens if after the decided buying point, stock prices continue to fall? You should not be buying stocks with money that you need in the short term.
https://www.bogleheads.org/forum/viewtopic.php?t=6212
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