Why Buying the Dip is a Terrible Investment Strategy - Nick Maggiulli

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golfer292
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Why Buying the Dip is a Terrible Investment Strategy - Nick Maggiulli

Post by golfer292 »

[Thread merged into here from: "Buying the Dips" --admin LadyGeek]

This opinion piece appeared on Marketwatch. It includes interesting performance charts comparing btd vs dca.
https://www.marketwatch.com/story/buy-t ... =home-page
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Re: "Buying the Dips"

Post by livesoft »

golfer292 wrote: Wed Sep 22, 2021 8:19 am This opinion piece appeared on Marketwatch. It includes interesting performance charts comparing btd vs dca.
https://www.marketwatch.com/story/buy-t ... =home-page
That's definitely a horrible "Buy The Dip" strategy. I wonder why the author did not pick a different "Buy The Dip" strategy to write about?
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Re: "Buying the Dips"

Post by mr_brightside »

probably not the forum for this question. the VAST majority of thought here is 'buy / hold' / long-term focus.

not really an audience for 'playing the market' short-term.

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Why Buying the Dip is a Terrible Investment Strategy - Nick Maggiulli

Post by Rowan Oak »

While it can be intriguing to stockpile cash to buy the dip, the data above suggests that this strategy is unlikely to win out in the long run. If you happened to successfully buy the dip once, take your victory lap then get back to investing as soon as you can. Though you might think you have the ability to market time, I suggest attributing your trade to good luck and then moving on.

The reason why Buy the Dip usually fails is simply because market dips, especially larger dips, are rare. Without dips to buy, Buy the Dip is just an 100% cash strategy, which is a terrible way to invest for the long term. More importantly, while large dips can generate larger returns, predicting them beforehand is near impossible. So be careful before waiting for one because your portfolio is likely to miss out.
Why Buying the Dip is a Terrible Investment Strategy
Posted September 21, 2021 by Nick Maggiulli

https://ofdollarsanddata.com/why-buying ... -strategy/
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Re: Why Buying the Dip is a Terrible Investment Strategy - Nick Maggiulli

Post by secondopinion »

Rowan Oak wrote: Wed Sep 22, 2021 5:54 pm
While it can be intriguing to stockpile cash to buy the dip, the data above suggests that this strategy is unlikely to win out in the long run. If you happened to successfully buy the dip once, take your victory lap then get back to investing as soon as you can. Though you might think you have the ability to market time, I suggest attributing your trade to good luck and then moving on.

The reason why Buy the Dip usually fails is simply because market dips, especially larger dips, are rare. Without dips to buy, Buy the Dip is just an 100% cash strategy, which is a terrible way to invest for the long term. More importantly, while large dips can generate larger returns, predicting them beforehand is near impossible. So be careful before waiting for one because your portfolio is likely to miss out.
Why Buying the Dip is a Terrible Investment Strategy
Posted September 21, 2021 by Nick Maggiulli

https://ofdollarsanddata.com/why-buying ... -strategy/
There are worse strategies, like "Sell the Dip".
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Re: Why Buying the Dip is a Terrible Investment Strategy - Nick Maggiulli

Post by LadyGeek »

I merged golfer292's thread into a similar discussion, started by Rowan Oak. The software sorts by time, golfer292's post come first.

They both refer to the same author with a similar discussion. I kept Rowan Oak's title.
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Re: Why Buying the Dip is a Terrible Investment Strategy - Nick Maggiulli

Post by livesoft »

The article is really about "Wait in Cash until a Dip" which is really a terrible strategy. One can "Buy the Dip" without waiting in cash until there is a dip. The folks who exchanged from bond fund shares into equities on the RBD earlier this week and then exchanged back a day or two later made enough money for many many sushi lunches that they would not have made simply doing nothing.
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Re: Why Buying the Dip is a Terrible Investment Strategy - Nick Maggiulli

Post by Dottie57 »

livesoft wrote: Wed Sep 22, 2021 6:43 pm The article is really about "Wait in Cash until a Dip" which is really a terrible strategy. One can "Buy the Dip" without waiting in cash until there is a dip. The folks who exchanged from bond fund shares into equities on the RBD earlier this week and then exchanged back a day or two later made enough money for many many sushi lunches that they would not have made simply doing nothing.
Agree about cash.

If one is DCAing a large amount over months, a large drop in price is where I would put a lot of the amount. Not a bad idea.
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Re: Why Buying the Dip is a Terrible Investment Strategy - Nick Maggiulli

Post by Chip »

livesoft wrote: Wed Sep 22, 2021 6:43 pm The article is really about "Wait in Cash until a Dip" which is really a terrible strategy. One can "Buy the Dip" without waiting in cash until there is a dip. The folks who exchanged from bond fund shares into equities on the RBD earlier this week and then exchanged back a day or two later made enough money for many many sushi lunches that they would not have made simply doing nothing.
Betting on Tesla at various points in time would have made me plenty of money as well.

What you are advocating appears to me to be nothing more than making small portfolio allocation changes based on which way the wind is blowing on a particular day. But with a cool, secret handshake acronym. Or, more charitably, a rebalancing strategy with extremely tight parameters that is only activated on the downside. Also with a cool, secret handshake acronym.
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Re: Why Buying the Dip is a Terrible Investment Strategy - Nick Maggiulli

Post by livesoft »

Chip wrote: Thu Sep 23, 2021 3:34 amWhat you are advocating appears to me to be nothing more than ....
I suppose one can think of it that way, but I prefer to think of it as a way to stay fully invested in one's asset allocation plan with less fear of market plunges and a semi-forced incentive to buy more equities when equities have dropped and a disincentive to sell equities when equities have dropped.
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Re: Why Buying the Dip is a Terrible Investment Strategy - Nick Maggiulli

Post by burritoLover »

livesoft wrote: Wed Sep 22, 2021 6:43 pm The article is really about "Wait in Cash until a Dip" which is really a terrible strategy. One can "Buy the Dip" without waiting in cash until there is a dip. The folks who exchanged from bond fund shares into equities on the RBD earlier this week and then exchanged back a day or two later made enough money for many many sushi lunches that they would not have made simply doing nothing.
Or whatever percentage in bonds used to buy the dip could have been in equities all along earning a higher return long term and equating to many more sushi lunches. Obviously that portion of bonds was not for preventing panic selling or needing to be used for short-term purchases.
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Re: Why Buying the Dip is a Terrible Investment Strategy - Nick Maggiulli

Post by livesoft »

burritoLover wrote: Thu Sep 23, 2021 6:27 am Or whatever percentage in bonds used to buy the dip could have been in equities all along earning a higher return long term and equating to many more sushi lunches. Obviously that portion of bonds was not for preventing panic selling or needing to be used for short-term purchases.
Ah, but at my age, I don't mind being cuddled in cozy warm blanket of bonds in front of the fireplace even if I occasionally have to toss it off in order to get up and put more wood on the fire.
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Re: Why Buying the Dip is a Terrible Investment Strategy - Nick Maggiulli

Post by invest2bfree »

W

There are worse strategies, like "Sell the Dip".
LOL, I have an extreme knack of doing that over and over.
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Re: Why Buying the Dip is a Terrible Investment Strategy - Nick Maggiulli

Post by secondopinion »

invest2bfree wrote: Thu Sep 23, 2021 7:48 am
W

There are worse strategies, like "Sell the Dip".
LOL, I have an extreme knack of doing that over and over.
:oops: At least one can tax loss harvest; I did that by leverage (buy now with leverage, wait 30 days, then sell the losing shares). I did that in March 2020 and it backfired in my favor.
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Re: Why Buying the Dip is a Terrible Investment Strategy - Nick Maggiulli

Post by Raraculus »

Why not both?

I make my DCA contributions. But, I also try to time them a little by buying the dip. These .5 to 1% dip opportunities come often. Granted, the recent stock run-up has made these dip opportunities somewhat scarce.

Someone should do a study on this. :beer
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Re: Why Buying the Dip is a Terrible Investment Strategy - Nick Maggiulli

Post by willthrill81 »

Another reason why 'buying the dip' is a bad strategy is because it runs directly counter to the momentum factor.

There's a good reason why 'trying to catch a falling knife' is eschewed among traders. You might be successful, but you're more likely to be hurt.
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Re: Why Buying the Dip is a Terrible Investment Strategy - Nick Maggiulli

Post by livesoft »

willthrill81 wrote: Thu Sep 23, 2021 12:11 pm Another reason why 'buying the dip' is a bad strategy is because it runs directly counter to the momentum factor.
The trick is to discern a change in momentum as it happens.
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Re: Why Buying the Dip is a Terrible Investment Strategy - Nick Maggiulli

Post by Armani »

I invest between $500-$600 every paycheck regardless of what the market is doing. Am I doing it wrong?
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Re: Why Buying the Dip is a Terrible Investment Strategy - Nick Maggiulli

Post by hnd »

when i was in college, i received a last minute scholarship that made on of my student loans unnecessary. I took the money anyway and put it in a savings account. this was 98. a bunch of us opened up etrade accounts in 00 and in late 00 we were "buying the dip"....well that didn't work...we "avged down" in 01 as well. it did not work well. not only did my money sit on the side lines during the ramp up, i began investing into a long dip and continued to lose money. now if i'd of invested that money in fall of 98 i still would of lost money be end of 2002 but only half as much as I lost instead.

in 2020 most of my capital was already tied up. i didn't have "dry powder" so to speak. what i did have were some depreciating assets and the ability to earn extra cash with so much time on my hands to then in turn "buy the dip". I think holding money on the sidelines earmarked for buying said dip can be disastrous.
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Re: Why Buying the Dip is a Terrible Investment Strategy - Nick Maggiulli

Post by secondopinion »

willthrill81 wrote: Thu Sep 23, 2021 12:11 pm Another reason why 'buying the dip' is a bad strategy is because it runs directly counter to the momentum factor.

There's a good reason why 'trying to catch a falling knife' is eschewed among traders. You might be successful, but you're more likely to be hurt.
Most traders are short-term and buying individual stocks. It is not a problem to buy general indexes at a discount for the long-term.

Two different timeframes. I will gladly buy a dip if it so happen to happen when I got new cash; it was cheaper than prior.
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Re: Why Buying the Dip is a Terrible Investment Strategy - Nick Maggiulli

Post by StartedAt22 »

Armani wrote: Thu Sep 23, 2021 12:21 pm I invest between $500-$600 every paycheck regardless of what the market is doing. Am I doing it wrong?
There is no objective wrong in regards to investing.

That said, assuming you are buying assets in accordance with an IPS that takes into account your need and willingness to take risks, your approach is, in my opinion, optimal.
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Re: Why Buying the Dip is a Terrible Investment Strategy - Nick Maggiulli

Post by Armani »

StartedAt22 wrote: Fri Sep 24, 2021 9:18 am
Armani wrote: Thu Sep 23, 2021 12:21 pm I invest between $500-$600 every paycheck regardless of what the market is doing. Am I doing it wrong?
There is no objective wrong in regards to investing.

That said, assuming you are buying assets in accordance with an IPS that takes into account your need and willingness to take risks, your approach is, in my opinion, optimal.

I don’t have an IPS. I just buy either BND or VTSAX however I need to maintain a 90/10 ratio.
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Re: Why Buying the Dip is a Terrible Investment Strategy - Nick Maggiulli

Post by StartedAt22 »

Armani wrote: Mon Sep 27, 2021 7:41 am
StartedAt22 wrote: Fri Sep 24, 2021 9:18 am
Armani wrote: Thu Sep 23, 2021 12:21 pm I invest between $500-$600 every paycheck regardless of what the market is doing. Am I doing it wrong?
There is no objective wrong in regards to investing.

That said, assuming you are buying assets in accordance with an IPS that takes into account your need and willingness to take risks, your approach is, in my opinion, optimal.

I don’t have an IPS. I just buy either BND or VTSAX however I need to maintain a 90/10 ratio.
Seems good enough. In your shoes I would:

Consider drafting / writing an IPS
See the bogleheads wiki for how to develop a plan
Consider international equity exposure

Or don't, and do what you're currently doing until you die. Outcome will probably be similar
A task begun is nearly half complete | Enough is as good as a feast | Risk: Ensure your goals can be met even under worst case scenario and be realistic.
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Re: Why Buying the Dip is a Terrible Investment Strategy - Nick Maggiulli

Post by StartedAt22 »

Armani wrote: Mon Sep 27, 2021 7:41 am
StartedAt22 wrote: Fri Sep 24, 2021 9:18 am
Armani wrote: Thu Sep 23, 2021 12:21 pm I invest between $500-$600 every paycheck regardless of what the market is doing. Am I doing it wrong?
There is no objective wrong in regards to investing.

That said, assuming you are buying assets in accordance with an IPS that takes into account your need and willingness to take risks, your approach is, in my opinion, optimal.

I don’t have an IPS. I just buy either BND or VTSAX however I need to maintain a 90/10 ratio.
Seems good enough. In your shoes I would:

Consider drafting / writing an IPS
See the bogleheads wiki for how to develop a plan
Consider international equity exposure

Or don't, and do what you're currently doing until you die. Outcome will probably be similar
A task begun is nearly half complete | Enough is as good as a feast | Risk: Ensure your goals can be met even under worst case scenario and be realistic.
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Re: Why Buying the Dip is a Terrible Investment Strategy - Nick Maggiulli

Post by Armani »

StartedAt22 wrote: Mon Sep 27, 2021 9:32 am
Armani wrote: Mon Sep 27, 2021 7:41 am
StartedAt22 wrote: Fri Sep 24, 2021 9:18 am
Armani wrote: Thu Sep 23, 2021 12:21 pm I invest between $500-$600 every paycheck regardless of what the market is doing. Am I doing it wrong?
There is no objective wrong in regards to investing.

That said, assuming you are buying assets in accordance with an IPS that takes into account your need and willingness to take risks, your approach is, in my opinion, optimal.

I don’t have an IPS. I just buy either BND or VTSAX however I need to maintain a 90/10 ratio.
Seems good enough. In your shoes I would:

Consider drafting / writing an IPS
See the bogleheads wiki for how to develop a plan
Consider international equity exposure

Or don't, and do what you're currently doing until you die. Outcome will probably be similar
I’m not a big fan of international. I feel US equities is enough.
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Re: Why Buying the Dip is a Terrible Investment Strategy - Nick Maggiulli

Post by mikejuss »

There's no problem with buying a dip; the problem is that the low point of a dip is impossible to predict.
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Re: Why Buying the Dip is a Terrible Investment Strategy - Nick Maggiulli

Post by StartedAt22 »

Armani wrote: Mon Sep 27, 2021 10:47 am
StartedAt22 wrote: Mon Sep 27, 2021 9:32 am
Armani wrote: Mon Sep 27, 2021 7:41 am
StartedAt22 wrote: Fri Sep 24, 2021 9:18 am
Armani wrote: Thu Sep 23, 2021 12:21 pm I invest between $500-$600 every paycheck regardless of what the market is doing. Am I doing it wrong?
There is no objective wrong in regards to investing.

That said, assuming you are buying assets in accordance with an IPS that takes into account your need and willingness to take risks, your approach is, in my opinion, optimal.

I don’t have an IPS. I just buy either BND or VTSAX however I need to maintain a 90/10 ratio.
Seems good enough. In your shoes I would:

Consider drafting / writing an IPS
See the bogleheads wiki for how to develop a plan
Consider international equity exposure

Or don't, and do what you're currently doing until you die. Outcome will probably be similar
I’m not a big fan of international. I feel US equities is enough.
I disagree, but to each their own. Good luck in your investing career! I think my first two points are still relevant for you, and should be considered.
A task begun is nearly half complete | Enough is as good as a feast | Risk: Ensure your goals can be met even under worst case scenario and be realistic.
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Re: Why Buying the Dip is a Terrible Investment Strategy - Nick Maggiulli

Post by Armani »

StartedAt22 wrote: Tue Sep 28, 2021 10:07 am
Armani wrote: Mon Sep 27, 2021 10:47 am
StartedAt22 wrote: Mon Sep 27, 2021 9:32 am
Armani wrote: Mon Sep 27, 2021 7:41 am
StartedAt22 wrote: Fri Sep 24, 2021 9:18 am

There is no objective wrong in regards to investing.

That said, assuming you are buying assets in accordance with an IPS that takes into account your need and willingness to take risks, your approach is, in my opinion, optimal.

I don’t have an IPS. I just buy either BND or VTSAX however I need to maintain a 90/10 ratio.
Seems good enough. In your shoes I would:

Consider drafting / writing an IPS
See the bogleheads wiki for how to develop a plan
Consider international equity exposure

Or don't, and do what you're currently doing until you die. Outcome will probably be similar
I’m not a big fan of international. I feel US equities is enough.
I disagree, but to each their own. Good luck in your investing career! I think my first two points are still relevant for you, and should be considered.
I’m open minded. Why is an international fund important to have as part of a balanced portfolio?
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Re: Why Buying the Dip is a Terrible Investment Strategy - Nick Maggiulli

Post by investor.was.here »

Same. Would rather sit in a balanced fund, take my -35% loss, then increase my risk for the rebound like going all equities or smaller caps.
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Re: Why Buying the Dip is a Terrible Investment Strategy - Nick Maggiulli

Post by StartedAt22 »

Armani wrote: Tue Sep 28, 2021 9:17 pm
StartedAt22 wrote: Tue Sep 28, 2021 10:07 am
Armani wrote: Mon Sep 27, 2021 10:47 am
StartedAt22 wrote: Mon Sep 27, 2021 9:32 am
Armani wrote: Mon Sep 27, 2021 7:41 am


I don’t have an IPS. I just buy either BND or VTSAX however I need to maintain a 90/10 ratio.
Seems good enough. In your shoes I would:

Consider drafting / writing an IPS
See the bogleheads wiki for how to develop a plan
Consider international equity exposure

Or don't, and do what you're currently doing until you die. Outcome will probably be similar
I’m not a big fan of international. I feel US equities is enough.
I disagree, but to each their own. Good luck in your investing career! I think my first two points are still relevant for you, and should be considered.
I’m open minded. Why is an international fund important to have as part of a balanced portfolio?
Why would excluding approx. ~50% of the world equities be considered a "balanced approach"? Is it impossible for you to think of a future where US equity returns are lower than international, or where the landscape for equity investing in the US is changed drastically by tax laws?

I think deviating from a global market weight portfolio is what requires an explanation, not the other way around. As contended initially though, the outcome will likely not be much different if you're simply subbing VTI + VXUS for just VTI or whatever.

Why do you feel only US equity exposure is enough?
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Re: Why Buying the Dip is a Terrible Investment Strategy - Nick Maggiulli

Post by Armani »

StartedAt22 wrote: Wed Sep 29, 2021 7:29 am
Armani wrote: Tue Sep 28, 2021 9:17 pm
StartedAt22 wrote: Tue Sep 28, 2021 10:07 am
Armani wrote: Mon Sep 27, 2021 10:47 am
StartedAt22 wrote: Mon Sep 27, 2021 9:32 am

Seems good enough. In your shoes I would:

Consider drafting / writing an IPS
See the bogleheads wiki for how to develop a plan
Consider international equity exposure

Or don't, and do what you're currently doing until you die. Outcome will probably be similar
I’m not a big fan of international. I feel US equities is enough.
I disagree, but to each their own. Good luck in your investing career! I think my first two points are still relevant for you, and should be considered.
I’m open minded. Why is an international fund important to have as part of a balanced portfolio?
Why would excluding approx. ~50% of the world equities be considered a "balanced approach"? Is it impossible for you to think of a future where US equity returns are lower than international, or where the landscape for equity investing in the US is changed drastically by tax laws?

I think deviating from a global market weight portfolio is what requires an explanation, not the other way around. As contended initially though, the outcome will likely not be much different if you're simply subbing VTI + VXUS for just VTI or whatever.

Why do you feel only US equity exposure is enough?
Over the last 10 years VTSAX has returned 14.86% whereas VTIAX has averaged 5.75%. Also, VTIAX’s worst year was far worse than VTSAX’s. I’m trying to maximize gains. Am I looking at this wrong?
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Re: Why Buying the Dip is a Terrible Investment Strategy - Nick Maggiulli

Post by StartedAt22 »

Armani wrote: Wed Sep 29, 2021 9:54 am
StartedAt22 wrote: Wed Sep 29, 2021 7:29 am
Armani wrote: Tue Sep 28, 2021 9:17 pm
StartedAt22 wrote: Tue Sep 28, 2021 10:07 am
Armani wrote: Mon Sep 27, 2021 10:47 am

I’m not a big fan of international. I feel US equities is enough.
I disagree, but to each their own. Good luck in your investing career! I think my first two points are still relevant for you, and should be considered.
I’m open minded. Why is an international fund important to have as part of a balanced portfolio?
Why would excluding approx. ~50% of the world equities be considered a "balanced approach"? Is it impossible for you to think of a future where US equity returns are lower than international, or where the landscape for equity investing in the US is changed drastically by tax laws?

I think deviating from a global market weight portfolio is what requires an explanation, not the other way around. As contended initially though, the outcome will likely not be much different if you're simply subbing VTI + VXUS for just VTI or whatever.

Why do you feel only US equity exposure is enough?
Over the last 10 years VTSAX has returned 14.86% whereas VTIAX has averaged 5.75%. Also, VTIAX’s worst year was far worse than VTSAX’s. I’m trying to maximize gains. Am I looking at this wrong?
Yes, you are. I could say the same thing about Bitcoin, or any other asset that has outperformed recently.

10 years is not a long time for new, young investors. Don't know if you mentioned your age or not.

Everybody is trying to maximize gains. But the flipside of that coin is mitigating risks. There is a balance, different for each investor.

If you are OK without having international that is totally fine and like I said the outcome probably won't be all that different holding US only vs. US & Int'l.

If the only reason you are tied to US equities is their recent performance, I think that can lead to behavioral mistakes which literature suggests is one of the biggest setbacks to individual investors with regards to maximizing returns.

Anyway, what do I know, I'm a schmuck.
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Re: Why Buying the Dip is a Terrible Investment Strategy - Nick Maggiulli

Post by mervinj7 »

livesoft wrote: Thu Sep 23, 2021 12:18 pm
willthrill81 wrote: Thu Sep 23, 2021 12:11 pm Another reason why 'buying the dip' is a bad strategy is because it runs directly counter to the momentum factor.
The trick is to discern a change in momentum as it happens.
So just differentiate the curve twice, right?
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Re: Why Buying the Dip is a Terrible Investment Strategy - Nick Maggiulli

Post by livesoft »

mervinj7 wrote: Wed Sep 29, 2021 10:20 am
livesoft wrote: Thu Sep 23, 2021 12:18 pm
willthrill81 wrote: Thu Sep 23, 2021 12:11 pm Another reason why 'buying the dip' is a bad strategy is because it runs directly counter to the momentum factor.
The trick is to discern a change in momentum as it happens.
So just differentiate the curve twice, right?
There you go, but first you have to have a curve. Good luck with that!
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Re: Why Buying the Dip is a Terrible Investment Strategy - Nick Maggiulli

Post by Armani »

StartedAt22 wrote: Wed Sep 29, 2021 9:58 am
Armani wrote: Wed Sep 29, 2021 9:54 am
StartedAt22 wrote: Wed Sep 29, 2021 7:29 am
Armani wrote: Tue Sep 28, 2021 9:17 pm
StartedAt22 wrote: Tue Sep 28, 2021 10:07 am

I disagree, but to each their own. Good luck in your investing career! I think my first two points are still relevant for you, and should be considered.
I’m open minded. Why is an international fund important to have as part of a balanced portfolio?
Why would excluding approx. ~50% of the world equities be considered a "balanced approach"? Is it impossible for you to think of a future where US equity returns are lower than international, or where the landscape for equity investing in the US is changed drastically by tax laws?

I think deviating from a global market weight portfolio is what requires an explanation, not the other way around. As contended initially though, the outcome will likely not be much different if you're simply subbing VTI + VXUS for just VTI or whatever.

Why do you feel only US equity exposure is enough?
Over the last 10 years VTSAX has returned 14.86% whereas VTIAX has averaged 5.75%. Also, VTIAX’s worst year was far worse than VTSAX’s. I’m trying to maximize gains. Am I looking at this wrong?
Yes, you are. I could say the same thing about Bitcoin, or any other asset that has outperformed recently.

10 years is not a long time for new, young investors. Don't know if you mentioned your age or not.

Everybody is trying to maximize gains. But the flipside of that coin is mitigating risks. There is a balance, different for each investor.

If you are OK without having international that is totally fine and like I said the outcome probably won't be all that different holding US only vs. US & Int'l.

If the only reason you are tied to US equities is their recent performance, I think that can lead to behavioral mistakes which literature suggests is one of the biggest setbacks to individual investors with regards to maximizing returns.

Anyway, what do I know, I'm a schmuck.
No, I’m the schmuck. I guess I’m more comfortable with companies that are familiar to me. If you say the outcome wouldn’t change by adding international, maybe I won’t fix something that isn’t broken. Although, I’ll probably add some to my portfolio.
I’m 45 years old.
rossington
Posts: 1823
Joined: Fri Jun 07, 2019 2:00 am
Location: Florida

Re: Why Buying the Dip is a Terrible Investment Strategy - Nick Maggiulli

Post by rossington »

livesoft wrote: Wed Sep 29, 2021 10:39 am
mervinj7 wrote: Wed Sep 29, 2021 10:20 am
livesoft wrote: Thu Sep 23, 2021 12:18 pm
willthrill81 wrote: Thu Sep 23, 2021 12:11 pm Another reason why 'buying the dip' is a bad strategy is because it runs directly counter to the momentum factor.
The trick is to discern a change in momentum as it happens.
So just differentiate the curve twice, right?
There you go, but first you have to have a curve. Good luck with that!
Buy low(er), sell high(er)...
"Success is going from failure to failure without loss of enthusiasm." Winston Churchill.
StartedAt22
Posts: 112
Joined: Sat Mar 06, 2021 9:26 pm
Location: Over Yonder

Re: Why Buying the Dip is a Terrible Investment Strategy - Nick Maggiulli

Post by StartedAt22 »

Armani wrote: Wed Sep 29, 2021 12:09 pm
StartedAt22 wrote: Wed Sep 29, 2021 9:58 am
Armani wrote: Wed Sep 29, 2021 9:54 am
StartedAt22 wrote: Wed Sep 29, 2021 7:29 am
Armani wrote: Tue Sep 28, 2021 9:17 pm

I’m open minded. Why is an international fund important to have as part of a balanced portfolio?
Why would excluding approx. ~50% of the world equities be considered a "balanced approach"? Is it impossible for you to think of a future where US equity returns are lower than international, or where the landscape for equity investing in the US is changed drastically by tax laws?

I think deviating from a global market weight portfolio is what requires an explanation, not the other way around. As contended initially though, the outcome will likely not be much different if you're simply subbing VTI + VXUS for just VTI or whatever.

Why do you feel only US equity exposure is enough?
Over the last 10 years VTSAX has returned 14.86% whereas VTIAX has averaged 5.75%. Also, VTIAX’s worst year was far worse than VTSAX’s. I’m trying to maximize gains. Am I looking at this wrong?
Yes, you are. I could say the same thing about Bitcoin, or any other asset that has outperformed recently.

10 years is not a long time for new, young investors. Don't know if you mentioned your age or not.

Everybody is trying to maximize gains. But the flipside of that coin is mitigating risks. There is a balance, different for each investor.

If you are OK without having international that is totally fine and like I said the outcome probably won't be all that different holding US only vs. US & Int'l.

If the only reason you are tied to US equities is their recent performance, I think that can lead to behavioral mistakes which literature suggests is one of the biggest setbacks to individual investors with regards to maximizing returns.

Anyway, what do I know, I'm a schmuck.
No, I’m the schmuck. I guess I’m more comfortable with companies that are familiar to me. If you say the outcome wouldn’t change by adding international, maybe I won’t fix something that isn’t broken. Although, I’ll probably add some to my portfolio.
I’m 45 years old.
As long as you have purposefully thought through the decision to include / exclude, I think whatever choice you make will be suitable.

There is so much information here from average joes and investment pros alike, so don't hesitate to immerse yourself in the wiki
A task begun is nearly half complete | Enough is as good as a feast | Risk: Ensure your goals can be met even under worst case scenario and be realistic.
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