"Stay the course" vs Buying opportunity when market drops?

[exodusing]

It’s a prediction. It’s not actual results. All of the actual results I look at every month are doing good.

It's a nowcast, not a prediction of where GDP is going in the future. As new data comes in, GDPNow tells us what we know about current GDP growth. The most recent release for GDP itself is for 2024Q4. That's not too helpful for someone wanting to know how the economy is doing in March 2025.

As a prominent economist puts it: You may have seen people citing the Atlanta Fed’s “nowcast” that attempts to infer GDP far in advance of the official numbers, and which is currently showing a sharp decline in the first quarter. But that’s almost certainly a statistical red herring: It’s mostly about a surge of gold imports in anticipation of Trump’s tariffs, which is screwing up the usually helpful Atlanta model.

[livesoft]

I only sold shares of BND and my remaining shares of BND ended up lower at the close and are trading at a lower price today. BND is the Vanguard Total US Bond Market Index ETF.

That’s odd… BND ended up 0.47% yesterday.

But BND closed below the higher prices it reached intraday, so I sold shares higher than the closing price. Is that really odd? I don't think so.

Also note that BND closed lower today than it did yesterday on March 10.

[J295]

Follow IPS.
If you don’t have one create one.

Fwiw our IPS has annual rebalancing. See vanguard white paper on efficacy of annual rebalance vs alternate methods.

[windaar]

What if it keeps dropping every day for a long time. Are you going to buy all the way down?

[gavinsiu]

What if it keeps dropping every day for a long time. Are you going to buy all the way down?

The answer would be yes. You have to have some faith that the market will eventually recover or you have bigger issue than the stock market to worry about.

You could get multiple years of down market. This happened in 2000 to 2002, investors had years of consecutive down market. If you kept investing you purchase share that would have gain big in the next decade.

During that time period I dutifully max out my 401k and put 100% into stock. I am not saying that you should be as aggressive. You could have had a less depressing time with some bonds.

[DocH]

I think it all comes down to your investment plan. One could have a plan that states rebalance yearly and when market down 10% or if AA off 6 % etc. and could have in plan when market down over 20% will use 3 months of anticipated spending in bonds to buy stocks in 401k. It maybe considered market timing but if it part of your plan I feel it is staying the course

[nydoc]

All sounds great but where is the pile or money to buy the dips? Cash is EF and rest gets invested quick.

[UNSpacy]

OP, it is simple to my mind:

1. No one can consistently predict whether the market goes up or down, particularly in the short term. If something is down today, this not predictive of whether it will go up or down tomorrow, next week or in a year.

2. Because I do not know whether equities / bonds will go up or down further from where they are today, there is no special 'buying opportunity'. I just maintain my asset allocation based on the level of risk I can accept / need to take to meet my goals and take what return the market gives.

This letting go of control seems to be the hardest part of the Bogleheads approach to accept for many people.

[edge]

Also depends on portfolio construction. EM, developed international, bonds, etc have muted the US TSM decline significantly.

1). I am not sure this drop is 'significant'. I did a quick and dirty look at things and I see S&P 500 down ~9%.
2). I suggest mechanical rebalancing bands to take emotion out of the equation. I have been a senior leader of many of thousands of people for many years now. Nearly every single person I speak to is driven as much (or more) by emotion than by anything else. Unless you can deeply inspect yourself and erase emotion out of your investing decision making process you need to make it cold and logical by having a system in-place.

This is a good post. This drop has been nothing. Barely 10% for the market investor? Big deal.

That said, if you invest in individual stocks, I'm sure ymmv. But I don't invest in individual stocks.

And having a system in place will help.

But some of us can't help ourselves and keep fiddling. If that is the case, just use a target fund and move on.

[investuntilimrich]

No, I don't invest or not based on the perceived state of the market because those perceptions are nearly always wrong and my horizon is long enough that even if someone were ever correct it would be meaningless. If I have irregular funds come available, usually through something like a bonus, I invest it immediately regardless of any other considerations. The only time I would not invest it would be if I had a sinking fund that was not fully funded yet.

[KEotSK66]

The value premium is discussed here frequently, as well as its weaker cousin mispricing.

The former has more risk associated with it but both can be seen as opportunities to buy low.

The market is spooked but an opportunity to buy low is presented and people balk?

If I had cash I would DCA, I hold a 40/60 portfolio and lost about 2% so far but I assume I'll lose up to 10% before the market calms down.

[corn18]

The value premium is discussed here frequently, as well as its weaker cousin mispricing.

The former has more risk associated with it but both can be seen as opportunities to buy low.

The market is spooked but an opportunity to buy low is presented and people balk?

If I had cash I would DCA, I hold a 40/60 portfolio and lost about 2% so far but I assume I'll lose up to 10% before the market calms down.

People aren't balking, some people don't have dry powder. Dry powder is market timing. Invest when you have money, withdraw when you need it. It's just that simple.

[Fallible]

I think it all comes down to your investment plan. One could have a plan that states rebalance yearly and when market down 10% or if AA off 6 % etc. and could have in plan when market down over 20% will use 3 months of anticipated spending in bonds to buy stocks in 401k. It maybe considered market timing but if it part of your plan I feel it is staying the course

That's pretty much my reaction to the OP's question: if buying opportunities are part of his course, then he would seem to be staying the course.

[Itogliano]

Keeping "spare" cash is timing the market. It is more likely to decrease returns over the long term since the market's historical trajectory is increasing, not decreasing.

If you have spare cash, the best time to buy is as soon as possible.

I haven't read every reply so this may have already been asked but is there ever any discourse on using your (general) emergency fund to take advantage of a sudden/sizeable market drop? I don't mean completely deplete your emergency fund, but if you have 12 months worth of an emergency fund, maybe using 4-6 months worth to add to the market and then replenish that the next few months.

This would obviously only work if you have a pretty conservative emergency fund

[rockstar]

Keeping "spare" cash is timing the market. It is more likely to decrease returns over the long term since the market's historical trajectory is increasing, not decreasing.

If you have spare cash, the best time to buy is as soon as possible.

I haven't read every reply so this may have already been asked but is there ever any discourse on using your (general) emergency fund to take advantage of a sudden/sizeable market drop? I don't mean completely deplete your emergency fund, but if you have 12 months worth of an emergency fund, maybe using 4-6 months worth to add to the market and then replenish that the next few months.

Having the emergency fund is what keeps me staying the course and having such a high equity allocation.

[livesoft]

All sounds great but where is the pile or money to buy the dips? Cash is EF and rest gets invested quick.

I guess you are not reading this thread. The pile of money comes from your bond funds that you sell to get the cash.

[KEotSK66]

People aren't balking, some people don't have dry powder. Dry powder is market timing. Invest when you have money, withdraw when you need it. It's just that simple.

If one doesn't have cash obviously they can't exploit the situation, that's why I posted "If".

I don't see fund managers committing cash just because they have cash on hand.

[investuntilimrich]

Fund managers tend to underperform the market. In other words, they do worse than we do, so I ignore them.

[KEotSK66]

Fund managers tend to underperform the market. In other words, they do worse than we do, so I ignore them.

Then there must be managers who outperform the market, no need to reply I know what you're going to say.

[jec1ny]

Market timing is a dangerous game. There is an old Wall Street adage to the effect of "don't try to catch a falling knife." There is also a phenomenon known as a bear trap or sucker's rally. There were a whole series of these in the early 1930s before the market finally hit bottom in the summer of 1932. I don't know if this is just a frothy market correcting or if we are in the early stages of something more serious. Back in December I sold 5% of my stock portfolio (VT) and socked it into cash as a slight hedge against economic and political uncertainty. That's about as far as I am interested in going in terms of market timing.

[kinless]

I don't necessarily see anything wrong with holding a little dry powder to scratch that itch, as long you don't have an excessive amount (<5%) standing by in your portfolio and it's at least earning 4-5% in some kind of money market fund.

I threw in a little bit yesterday. Probably not enough to make any meaningful difference in the long run, but it makes me feel smarter than I am.

[BrooklynInvest]

I don't have spare cash. Because I don't know when the market will go up, down or sideways the opportunity cost is too great for me over the long run.

Even with self-inflicted economic damage, at some point the damage will stop. I don't know when that'll be either.

Good job I'm a boglehead eh

[livesoft]

Without any spare cash, but with "spare" shares of BND, one can sell BND high, buy equities, see BND drop, see equities go up, then reverse the trades: Sell equities for a gain, buy back BND at lower price than sold.

Of course, it doesn't have to work that way, but this idea of "dry powder" and holding cash is just plain bogus. I suppose someone will come along and say "What about all those taxes?" And the answer to that question is "Use a tax-deferred account."

Of course, bogleheads do not market time nor day trade, but they do rebalance their portfolios.

[corn18]

Without any spare cash, but with "spare" shares of BND, one can sell BND high, buy equities, see BND drop, see equities go up, then reverse the trades: Sell equities for a gain, buy back BND at lower price than sold.

Of course, it doesn't have to work that way, but this idea of "dry powder" and holding cash is just plain bogus. I suppose someone will come along and say "What about all those taxes?" And the answer to that question is "Use a tax-deferred account."

Of course, bogleheads do not market time nor day trade, but they do rebalance their portfolios.

For some reason, I have never had to rebalance. In accumulation phase, I just bought whatever I needed to stay balanced. In retirement, I just withdraw whatever I need to stay balanced. I didn't start investing until 2013, though, so I missed the Great Recession.

[livesoft]

For some reason, I have never had to rebalance. In accumulation phase, I just bought whatever I needed to stay balanced. In retirement, I just withdraw whatever I need to stay balanced. I didn't start investing until 2013, though, so I missed the Great Recession.

I think "the some reason" is probably that you didn't look continuously, so you didn't see any of those "fleeting moments" where your portfolio was more out of balance than a simple withdrawal or contribution would get it back into balance --- not that there is anything wrong with not looking.

[rkhusky]

For some reason, I have never had to rebalance. In accumulation phase, I just bought whatever I needed to stay balanced. In retirement, I just withdraw whatever I need to stay balanced. I didn't start investing until 2013, though, so I missed the Great Recession.

How about the end of 2018 or beginning of 2020, where there were some large market drops? They were sharp drops, so, if you don’t check often, you might have missed. 2022 was also a big drop, but bonds also fell, so perhaps rebalancing wasn’t necessary.

[White Coat Investor]

"Stay the course" - a Bogleheads mantra that we have been living by for many years. Event the 2008 crash did not cause us to make portfolio changes.
But when the market drops significantly as it is doing now, do Bogleheads see this as a buying opportunity if there is spare cash laying around? If so what do you buy?

Yes. If you have 'spare cash" invest it. I get spare cash every month because I'm still working. I use it to invest, whether the market went up or down. That's my course. So I stay it. I bought stocks in December, January, February, and March. I'll buy some more in April most likely.

[TwstdSista]

My IPS says no market timing, so that's what I'm doing.