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Just keep buying. A post by Nick Maggiulli in 2017: > Many investors focus on the right time to buy stocks because they don’t want to buy near a peak in case

Just keep buying. A post by Nick Maggiulli in 2017: > Many investors focus on the right time to buy stocks because they don’t want to buy near a peak in case of a future market crash. I understand the feeling. With the market near all time highs in early 2017, it can be tempting to hold off until there is a larger negative adjustment in prices. > The only problem with this approach is the market could go up for a significant period of time before a correction happens. > For example, if you search “stock market overvalued 2012” on Google you can find plenty of stories discussing how overvalued stocks were in 2012. If you had started waiting for an S&P 500 correction then, you would have missed out on the ~70+% increase in prices from 2012 through early 2017. * https://ofdollarsanddata.com/just-keep-buying/ https://ofdollarsanddata.com/just-keep-buying/ And what has the S&P 500 done since 2017? Continuing: > If I still haven’t convinced you, let me tell you a story. The story is about a man with possibly the worst luck in investing history.[0][1] He made a total of 4 large stock purchases between 1973 and 2007. He bought in 1973 before a 48% decline in stocks, bought in 1987 before a 34% decline, bought in 2000 before the dot com crash, and bought in 2007 before the Great Recession. > Despite these 4 individual purchases that totaled a little less than $200,000, how did he do? He ended up with a $980,000 profit for a 9% annualized return. What was his secret? He never sold. > That’s right. Selling out is literally selling out your future wealth. You need to hold on to your assets as you acquire more. > This is the purpose of capitalism (i.e. acquiring capital). The only time you should sell your investments is for rebalancing (annually/quarterly, etc.) or in retirement. Otherwise, you already know the mantra. * [0] https://www.cnbc.com/2015/08/27/the-inspiring-story-of-the-worst-market-timer-ever.html https://www.cnbc.com/2015/08/27/the-inspiring-story-of-the-w... * [1] https://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/ https://awealthofcommonsense.com/2014/02/worlds-worst-market... And as Maggiulli shows, trying to buy the dip, even when you know when the dip will occur (which is impossible), gives worse results than simply putting away a little bit every month: * https://ofdollarsanddata.com/even-god-couldnt-beat-dollar-cost-averaging/ https://ofdollarsanddata.com/even-god-couldnt-beat-dollar-co... Put away a little every pay cheque, in a diversified low-fee fund (S&P 500, Total Market/Russell 3000), at a comfortable risk profile that allows you to sleep at night (0/20/40% bonds), and try not to pay attention too much about what The Market™ is doing. Most of us are investing for retirement, and if you do the above, you'll probably end up with a decent nest egg. Save a little for the future, and enjoy the present.

sfblah 6y ago
This line of reasoning assumes the future looks like the past. Which is generally a solid mode of thinking. But, if the future looks like the past, shouldn't it give you pause that on many metrics markets are substantially more richly valued than at any peak in the last 100 years? You can't have it both ways. Either the past is useful or it's not. If it's useful, then you have two conflicting data points -- market timing doesn't work, and we're at the top of a big bubble. If the past isn't useful, then neither data point is valid. Now, you'll probably argue that even if it is a big bubble, the past suggests it always comes back. Setting aside the obvious fact that it's mathematically better to buy after the bubble bursts than before, you're in the same conundrum. Does the past matter or not? If it does, then yes you should expect to recoup the money eventually from buying at the top (though, if you bought at the top in 1929, you had to wait until the 1950s to get back to even). If the past doesn't matter and this time is different, then you can't say anything productive about the future.
- throw0101a 6y ago
  > If it's useful, then you have two conflicting data points -- market timing doesn't work, and we're at the top of a big bubble. Market timing does not work over the long-term, and even if we are at the top of the bubble, you can't know we're at the top, but more importantly: it doesn't matter. * https://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/ https://awealthofcommonsense.com/2014/02/worlds-worst-market... > If it does, then yes you should expect to recoup the money eventually from buying at the top (though, if you bought at the top in 1929, you had to wait until the 1950s to get back to even). And what would your returns if you kept doing DCA every paycheque from the 1929 top, on the ride all the way done, and then little by little through the 1930s, 1940s, and 1950s? Turns out, not horrifically: > I wanted to show how market conditions can affect the end results of an investor who periodically invests in the stock market over time. Leaving aside taxes, costs, inflation, etc., I ran the numbers by decade going back to the 1930s to see how much money an investor would have ended up with by investing $10,000 each year on a monthly basis (or $833/month) in the S&P 500. * https://awealthofcommonsense.com/2018/04/the-luck-of-the-draw-when-diversifying-across-time/ https://awealthofcommonsense.com/2018/04/the-luck-of-the-dra... Especially if you have some bonds to rebalance with: > For instance, investors earned a real 2% average annual return on their equity investments during the 1930s, according to Ibbotson Associates, a market research firm. But they pocketed a real 7.1% on their government bonds and 2.7% on short-term Treasury bills. Yet during the 1950s investors earned a real average annual return of 16.8% on stocks, while losing 2.2% on bonds and 0.3% on bills. * https://www.marketplace.org/2009/01/05/history-rewards-stalwart-investor/ https://www.marketplace.org/2009/01/05/history-rewards-stalw... Bonds and rebalancing also would have saved a portfolio with the S&P 500 in the 2000s: * https://www.forbes.com/sites/investor/2010/12/17/the-lost-decade-was-a-golden-age-if-you-rebalanced/ https://www.forbes.com/sites/investor/2010/12/17/the-lost-de...

sfblah 6y ago

This line of reasoning assumes the future looks like the past. Which is generally a solid mode of thinking. But, if the future looks like the past, shouldn't it give you pause that on many metrics markets are substantially more richly valued than at any peak in the last 100 years? You can't have it both ways. Either the past is useful or it's not. If it's useful, then you have two conflicting data points -- market timing doesn't work, and we're at the top of a big bubble. If the past isn't useful, then neither data point is valid. Now, you'll probably argue that even if it is a big bubble, the past suggests it always comes back. Setting aside the obvious fact that it's mathematically better to buy after the bubble bursts than before, you're in the same conundrum. Does the past matter or not? If it does, then yes you should expect to recoup the money eventually from buying at the top (though, if you bought at the top in 1929, you had to wait until the 1950s to get back to even). If the past doesn't matter and this time is different, then you can't say anything productive about the future.

throw0101a 6y ago
> If it's useful, then you have two conflicting data points -- market timing doesn't work, and we're at the top of a big bubble. Market timing does not work over the long-term, and even if we are at the top of the bubble, you can't know we're at the top, but more importantly: it doesn't matter. * https://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/ https://awealthofcommonsense.com/2014/02/worlds-worst-market... > If it does, then yes you should expect to recoup the money eventually from buying at the top (though, if you bought at the top in 1929, you had to wait until the 1950s to get back to even). And what would your returns if you kept doing DCA every paycheque from the 1929 top, on the ride all the way done, and then little by little through the 1930s, 1940s, and 1950s? Turns out, not horrifically: > I wanted to show how market conditions can affect the end results of an investor who periodically invests in the stock market over time. Leaving aside taxes, costs, inflation, etc., I ran the numbers by decade going back to the 1930s to see how much money an investor would have ended up with by investing $10,000 each year on a monthly basis (or $833/month) in the S&P 500. * https://awealthofcommonsense.com/2018/04/the-luck-of-the-draw-when-diversifying-across-time/ https://awealthofcommonsense.com/2018/04/the-luck-of-the-dra... Especially if you have some bonds to rebalance with: > For instance, investors earned a real 2% average annual return on their equity investments during the 1930s, according to Ibbotson Associates, a market research firm. But they pocketed a real 7.1% on their government bonds and 2.7% on short-term Treasury bills. Yet during the 1950s investors earned a real average annual return of 16.8% on stocks, while losing 2.2% on bonds and 0.3% on bills. * https://www.marketplace.org/2009/01/05/history-rewards-stalwart-investor/ https://www.marketplace.org/2009/01/05/history-rewards-stalw... Bonds and rebalancing also would have saved a portfolio with the S&P 500 in the 2000s: * https://www.forbes.com/sites/investor/2010/12/17/the-lost-decade-was-a-golden-age-if-you-rebalanced/ https://www.forbes.com/sites/investor/2010/12/17/the-lost-de...