Adding to all this.....we have not had a prolonged "slow bleed" for a long time, where a market in decline continues to decline.financeidiot wrote: ↑Thu Sep 28, 2017 9:56 amYou're probably going to get the same set of rebuttals to every response about a market timing strategy that appears to work:
1. Past performance is not indicative of future performance. Models adjusted to fit backtested data are not guaranteed to fit future data.
2. Historical stock market data are limited. The OP seems to have backtested up to 40 years where market data are available. However, 40 years in the history of global economics is limited.
3. Transaction costs and taxes lower performance. The original poster was using a tax-free account in Canada to execute trades, this leads to better performance than if the strategy had taken place in a U.S. taxable account, performance would have been lower (but still good).
4. Effective strategies become less effective over time as more people discover and adopt them.
5. Non-passive strategies are psychologically difficult to execute. The OP has above average fortitude to stick to buying the dips. Most people cannot stay dedicated to a similar strategy.
6. Non-passive strategies are technically difficult to execute. This strategy appears more straightforward, but most people cannot execute complicated trading strategies.
The few big winners of investing in the future will be active traders, the many big losers will be active traders, the happy middle will be Bogleheads. There's always going to be some strategy that is better than passive investing, but most people will not be able to identity it, execute it, and abandon it when the time is right.
When things rebound rapidly, of course the strategy works. But if they don't you can be in serious trouble. And you never know.
When the NASDAQ fell from around 5000 to around 3500 around 1999 I thought it was a "great buying opportunity" . By 2002 it was down around 1100. Accounting for inflation I don't know if the NASDAQ has rebounded in real terms to its 1999 high yet.
So the strategy comes with serious risks.
Just think "Japan". If you kept buying the Nikkei on dips you would be broke by now.
Nobody "proves" anything by using limited past data.